The information
contained in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities and are not soliciting an offer to buy
these securities in any state where the offer or sale is not
permitted.
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Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-131886
CALCULATION
OF REGISTRATION FEE CHART
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Proposed maximum
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Proposed maximum
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Title of each class of
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Amount to
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offering price
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aggregate offering
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Amount of
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securities to be registered
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be registered
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per share(1)
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price
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registration fee
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Common stock, par value $0.01 per share
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1,437,500 shares
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62.93
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$90,461,875
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$3,555.15 (2)
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Common stock, par value $0.01 per share
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|
4,111,711
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$0.01
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$41,117
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|
$1.62
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|
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(1)
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Estimated solely for purposes of calculating the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933
on the average of the high and low prices of the common stock on
June 10, 2008.
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(2)
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|
This filing fee of $3,556.77 is calculated and being paid
pursuant to Rule 457(r) of the Securities Act of 1933 and
relates to the registration statement on
Form S-3
(File
No. 333-131886)
filed by Energy Conversion Devices, Inc. on February 16,
2006.
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SUBJECT TO COMPLETION, DATED
JUNE 12, 2008
PRELIMINARY PROSPECTUS
SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 15, 2006
4,708,500 Shares
Energy Conversion Devices,
Inc.
Common Stock
We are offering an aggregate of 4,708,500 shares of common
stock of Energy Conversion Devices, Inc. 1,270,000 of these
shares are being underwritten by the underwriters named below
and are being offered to the public for our account. We refer to
this portion of the offering of common stock as the
underwritten equity offering and the shares sold in
the underwritten equity offering as the underwritten
shares. 3,438,500 shares of our common stock being
offered hereby are shares that we will loan to Credit Suisse
International, or CSI, as borrower, through Credit
Suisse Securities (USA) LLC, as agent, pursuant to a share
lending agreement. These shares are often referred to in this
prospectus supplement as the borrowed shares. CSI is
an affiliate of Credit Suisse Securities (USA) LLC, which is
acting as a managing underwriter in this offering. Because the
borrowed shares must be returned to us by June 15, 2013, we
believe that under U.S. GAAP the borrowed shares will not
be considered outstanding for the purpose of computing and
reporting our earnings per share.
We will receive cash proceeds from the sale of the underwritten
shares. We estimate that the net proceeds from the sale of
underwritten shares by us, after deducting estimated
underwriting discounts and commissions and estimated offering
expenses payable by us, will be approximately
$ , assuming the
underwriters over-allotment option is not exercised. We
will not receive any proceeds from the sale of the borrowed
shares in this offering, but we will receive a nominal lending
fee of $0.01 per share from CSI for the use of these shares. CSI
will receive all the proceeds from the sale of the borrowed
shares, and it has agreed to use the borrowed shares to
facilitate privately negotiated transactions or short sales by
which investors hedge their investments in the notes, which are
being offered in a concurrent registered offering, and certain
other of our securities. See Description of the Share
Lending Agreement and Concurrent Offering of Convertible
Notes and Underwriting Borrowed
Shares.
Our common stock is listed on the Nasdaq Global Select Market
under the symbol ENER. On June 11, 2008, the
last reported sale price of our common stock was $64.24 per
share.
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Per share
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Total
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Public offering price of the underwritten shares
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$
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$
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Underwriting discounts and commissions
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$
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$
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Proceeds to Energy Conversion Devices, Inc. (before expenses)
from the sale of underwritten shares
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$
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$
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The borrowed shares may be offered for sale in transactions,
including block sales, in the over-the-counter market, in
negotiated transactions or
otherwise. of
these shares will be initially offered at
$ per share, and the
remaining borrowed shares will subsequently be sold at
prevailing market prices at the time of sale or at negotiated
prices.
We have granted the underwriters a
30-day
option to purchase up to 190,500 additional shares of our
common stock in connection with the underwritten equity offering
at the public offering price, less the underwriting discounts
and commissions, to cover over-allotments.
The delivery of the borrowed shares being offered hereby is
contingent upon the closing of the concurrent convertible notes
offering. We expect that delivery of the borrowed shares will be
made concurrently with the closing of the convertible notes
offering.
Investing in our common stock
involves risks. See Risk Factors beginning on
page S-9
of this prospectus supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
related prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
Credit Suisse, on behalf of the underwriters, expects to
deliver shares of common stock,
including of the borrowed shares, on or about
June , 2008.
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CREDIT
SUISSE
|
UBS INVESTMENT BANK
|
JPMORGAN
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|
DEUTSCHE
BANK SECURITIES
|
LAZARD CAPITAL MARKETS
|
June , 2008
Energy Conversion Devices, Inc.
®
Building-integrated and commercial rooftop photovoltaics
|
TABLE OF
CONTENTS
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Prospectus Supplement
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Page
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S-ii
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S-iii
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S-1
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S-9
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S-25
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S-26
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S-27
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S-28
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S-32
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S-35
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S-37
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S-39
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S-43
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S-45
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S-46
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S-46
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S-46
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Prospectus
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Page
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About This Prospectus
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1
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Energy Conversion Devices, Inc.
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1
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Cautionary Note Regarding Forward-Looking Statements
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2
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Description of the Securities
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2
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Plan of Distribution
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12
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Use of Proceeds
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12
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Ratio of Earnings to Fixed Charges
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12
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Legal Matters
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12
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Experts
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13
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Where You Can Find More Information
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13
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Incorporation of Certain Information by Reference
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13
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About
This Prospectus Supplement
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this offering,
risks related to an investment in the common stock, and a
discussion of risks our business faces. The second part, the
accompanying prospectus, gives more general information, some of
which may not apply to this offering. If any statement in this
prospectus supplement varies between this prospectus supplement
and the accompanying prospectus, you should rely only on the
information contained or incorporated by reference in this
prospectus supplement.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any free writing prospectus prepared
by or on behalf of us. We have not, and the underwriters have
not, authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted.
You should assume that the information appearing in this
prospectus supplement, the accompanying prospectus and the
documents incorporated by reference is accurate only as of the
respective dates of those documents in which the information is
contained. Our business, financial condition, results of
operations and prospects may have changed since any of those
respective dates. You should read this entire prospectus
supplement, as well as the accompanying prospectus and the
documents incorporated by reference that are described under
Where You Can Find More Information in this
prospectus supplement and the accompanying prospectus before
making your investment decision. Unless otherwise indicated
herein, the information in this prospectus supplement assumes no
exercise of the underwriters option to purchase additional
shares described herein.
In this prospectus supplement, we rely on and refer to
information regarding the market in which we operate and compete
and other related markets. We obtained this information from
various third-party sources, including industry publications,
surveys and forecasts that we believe to be reasonable. We also
make statements in this prospectus supplement regarding the
performance, characteristics or properties of our products.
Unless indicated otherwise, these statements are based on our
own studies, internal data and information obtained from our
customers.
S-ii
Cautionary
Note Regarding Forward-Looking Statements
This prospectus supplement includes forward-looking
statements that involve risks and uncertainties. These
forward-looking statements are made pursuant to safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include statements concerning
our plans, objectives, goals, strategies, future events, future
sales or performance, capital expenditures, financing needs,
plans or intentions relating to acquisitions, business trends
and other information that is not historical information. When
used in this prospectus, the words estimates,
expects, anticipates,
projects, plans, intends,
believes, forecasts,
foresees, likely, may,
should, goal, target and
variations of such words or similar expressions are intended to
identify forward-looking statements. All forward-looking
statements are based upon information available to us on the
date of this prospectus supplement.
These forward-looking statements are subject to risks,
uncertainties and other factors, many of which are outside of
our control, that could cause actual results to differ
materially from the results discussed in the forward-looking
statements, including, among other things, the matters discussed
in this prospectus supplement in the section captioned
Risk Factors. Factors you should consider that could
cause these differences are:
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the worldwide demand for electricity and the market for
renewable energy, including solar energy;
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the ability or inability of conventional fossil fuel-based
generation technologies to meet the worldwide demand for
electricity;
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government subsidies and policies supporting renewable energy,
including solar energy;
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our expenses, sources of sales and international sales and
operations;
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future pricing of, and demand for, our solar laminates;
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the performance, features and benefits of our solar laminates
and plans for the enhancement of solar laminates;
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the supply and price of components and raw materials;
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our ability to expand our manufacturing capacity in a timely and
cost-effective manner;
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our ability to retain our current key executives, integrate new
key executives and attract and retain other skilled managerial,
engineering and sales marketing personnel;
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the viability of our intellectual property and our continued
investment in research and development;
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payments and other obligations resulting from the unfavorable
resolution of legal proceedings;
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changes in, or the failure to comply with, government
regulations and environmental, health and safety requirements;
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interest rate fluctuations and both our and our end-users
ability to secure financing on commercially reasonable terms or
at all; and
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general economic and business conditions, including those
influenced by international and geopolitical events such as the
war in Iraq and any future terrorist attacks.
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There may be other factors that could cause our actual results
to differ materially from the results referred to in the
forward-looking statements. We undertake no obligation to
publicly update or revise forward-looking statements to reflect
events or circumstances after the date made or to reflect the
occurrence of unanticipated events, except as required by law.
S-iii
Prospectus
Supplement Summary
This summary highlights information contained elsewhere in
this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference. This summary does not
contain all of the information that you may consider to be
important in deciding whether to invest in our common stock. You
should read this entire prospectus supplement, the accompanying
prospectus and the documents incorporated by reference
carefully, including the Risk Factors section
beginning on page S-9 of this prospectus supplement, as
well as our consolidated financial statements and the related
notes incorporated by reference.
Unless otherwise specified or unless the context requires
otherwise, all references in this prospectus supplement to
ECD, we, us, our
or similar references mean Energy Conversion Devices, Inc. and
its subsidiaries.
Our
Company
We design, manufacture and sell photovoltaic (PV)
products, commonly referred to as solar cells, solar modules or
solar laminates, that provide clean, renewable energy by
converting sunlight into electricity. Our solar laminates have
unique characteristics that differentiate them from conventional
crystalline solar modules, including physical flexibility, low
weight, high durability and ease of installation. These
characteristics make our products particularly suitable for
rooftop applications, which is our target market. We manufacture
our solar laminates using a proprietary process and technology
that we developed through nearly 30 years of research.
Demand for our solar laminates, which we market under the brand
name
UNI-SOLAR
®
,
currently exceeds our ability to manufacture these products, and
we believe this trend will continue for some time. To meet the
increasing demand for our products, we are actively expanding
our production capacity and have embarked on an expansion plan
to reach 1 GW of annual production capacity by 2012. Solar
laminate sales represent more than 90% of our revenues. We also
receive fees and royalties from licensees of our nickel metal
hydride (NiMH) battery technology and sell high
performance nickel hydroxide used in NiMH batteries.
We appointed a new President and Chief Executive Officer in
September of 2007, who is leading a new management team, all of
whom have been appointed since June 2006, including our Chief
Financial Officer, Vice President of Operations, Senior Vice
President and Chief Administration Officer, Vice President of
Strategic Marketing, Vice President of Systems Engineering and
Vice President of Global Sales. Over the past several months,
this new leadership team has implemented a series of strategic
initiatives designed to strengthen our competitive position and
improve our financial performance, including:
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Focusing our efforts on expanding our solar
business.
We have made a strategic decision to
focus our business on the production and sale of our solar
laminates. We believe this concentration will enable us to
capitalize on global PV market growth opportunities and position
us for increased profitability.
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Implementing best practices to improve ramp times, increase
production yields and lower costs.
We have
developed and implemented techniques to reduce our ramp
time. The phrase ramp time refers to the
amount of time it takes to bring a new production line to
nameplate capacity, which is the amount of annual
production of solar laminates measured in watts that a plant
initially is designed to produce. Shorter ramp times reduce our
costs and enable us to accelerate the availability of our
finished products for sale. We have also developed and
implemented improved manufacturing practices in our facilities
that are resulting in higher production yields and lower
production costs, thereby increasing our gross margins.
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Restructuring our operations to reduce costs related to
non-solar related activities and streamlining our organization
and reporting structure.
In April 2007, we began
implementing a restructuring plan to reduce costs in our
non-manufacturing activities. This plan includes the elimination
of over 100 employees and other changes, which we expect to
result in approximately $23.0 million of annualized cost
savings (as implemented through June 30, 2008). We expect
to realize further savings primarily through facility
rationalization programs related to non-manufacturing
activities. In June 2007, we also realigned our organizational
structure into two segments and began a process of consolidating
support functions within our businesses. These actions have
streamlined our decision-making processes and reduced our costs.
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S-1
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Reviewing strategic alternatives with respect to our non-core
businesses.
In connection with concentrating our
efforts on our solar business, we are performing ongoing reviews
of our other business activities. These reviews are designed to
identify activities where we can realize greater value for our
stockholders through a variety of mechanisms, including
potential exits of these activities. For example, in May 2008,
we announced that we were engaged in discussions to sell our
ownership interest in Cobasys LLC (Cobasys), a joint
venture with Chevron Technology Ventures, LLC (CTV)
that manufactures hybrid vehicle batteries and battery systems.
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Our
Market Opportunity
Solar power technology has been used to generate electricity in
space program applications for several decades and in commercial
applications over the last 30 years. Increasingly,
government incentive programs are accelerating the adoption of
solar power. According to Solarbuzz, a research and consulting
firm, the global PV market grew to an estimated 2,826 MW in
2007, as measured by total PV modules delivered to installation
sites during that year, representing a compound annual growth
rate of 47.4% since 2003. Solarbuzz estimates that PV industry
revenues were approximately $17.2 billion in 2007 and
projects under one of its forecast scenarios that the global PV
market and PV industry revenues will reach 9,917 MW and
$39.5 billion, respectively, in 2012.
Today, the cost per kilowatt hour for solar power is higher than
electricity delivered through the power grid. However, the cost
for electricity delivered through the power grid has been
increasing steadily while the cost of solar power has been
decreasing. Some industry and government publications have
indicated that the cost of solar power may become as economical
as electricity delivered through the power grid by 2015.
Thin-film technologies, such as our solar laminates, are being
developed as a means of substantially reducing the cost of PV
systems as they are cheaper to manufacture than traditional PV
systems due to their reduced material, energy, handling and
capital costs. Growth in thin-film demand is expected to be
driven by rising conversion efficiency and increased demand for
building-integrated photovoltaics (BIPV), such as
grid-connected roof-mounted PV systems. According to one of
Solarbuzzs forecast scenarios, grid-connected roof-mounted
PV systems are expected to grow from approximately 56% of the
total PV market in 2007 to 66% of the market by 2012. Within the
overall roof-mounted market, many commercial buildings can be
powered by less than 5
watts/ft
2
.
We believe the installed solar capacity on commercial rooftops
could reach 5 GW by 2012.
Our
Competitive Strengths
We have several competitive strengths, including:
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Our products are well-suited for rooftop applications and
possess several unique attributes.
Our PV
laminates possess several unique attributes that make them ideal
for both rooftop and building integrated applications, including:
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Ability to be integrated with roofing materials and to
qualify for special BIPV incentives.
Unlike
conventional solar modules, our products are physically
flexible, do not require a metal frame and can be integrated
directly with roofing materials during production to create a
seamless appearance. France and Italy, which are among the most
significant markets for solar products, have recently instituted
higher incentives for BIPV than for ground mount installations.
These governments typically define BIPV products as those that
represent an essential component of the roofing materials
themselves. We believe our PV laminates are one of only a few
products available today that qualify as BIPV under this
definition.
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Low weight.
Our PV laminates weigh less than
one pound per square foot. This compares with between two and
five pounds per square foot for conventional solar modules. The
relatively low weight of our products allows them to be used on
most rooftops without the need for reinforcement which can add
significant cost to the installation.
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Superior resistance to wind lift.
Our PV
laminates have a low profile and are bonded to, or integrated
with, the roof as opposed to being mounted on a raised support
structure like many conventional solar modules. This gives our
products superior resistance to wind lift, which can loosen and
even dislodge conventional solar modules in storm prone areas.
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S-2
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No roof penetration.
Our PV laminates are
bonded to roofing materials during production or to existing
roof surfaces by their adhesive backing and do not require
penetrating the roof with bolts or other fasteners like many
conventional solar modules. We believe that end-users prefer
systems that do not result in roof penetrations as such
installations may lead to leaks, damages to the structural
integrity of the roof or invalidation of the roof
manufacturers warranty.
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High durability and impact resistance.
Our PV
laminates are flexible and can be walked on or dropped with
minimal risk of damaging the product. Dropping a conventional
solar module, which generally is enclosed in glass, can often
destroy the entire product.
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Ease of installation.
Our PV laminates can be
shipped in rolls directly to the installation site in addition
to being integrated with the roofing materials. Installers
remove a release paper from the back of our products as they
unfurl the roll on the roof. The release paper reveals an
adhesive backing that allows the product to be bonded directly
to the roof. We believe the installation process for our
products is significantly less time consuming than the
installation process for conventional glass-based solar modules,
which typically involves building a support structure and
mounting each module individually. This simplified installation
process results in cost savings to our customers.
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Effective research and development activities supporting
innovation in our solar business
. Our research
and development group is a leader in the development of
thin-film solar technology and has been recognized for achieving
high efficiency solar cells using this technology. For example,
we developed the first commercial flexible PV product. We
continue to develop new innovative technologies to reduce
production cost, improve light-to-electricity conversion
efficiency, and identify new commercial applications for our
products.
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Our products do not use polysilicon, which is currently in
short supply
. Conventional solar modules are made
from crystalline silicon wafers. These wafers are made from
polysilicon, which is also used to produce semiconductor chips.
Rising demand for solar modules has led to a significant
increase in the price of polysilicon. From December 2004 to the
second half of 2007, the average spot price of polysilicon
increased from $32 per kilogram to nearly $400 per kilogram and
several polysilicon manufacturers have reported that their
capacity is sold out for the next two to three years. Our
production process uses silane gas to deposit a thin film of
amorphous silicon on a sheet of stainless steel. Silane gas is
widely available and we have agreements in place with multiple
suppliers. We believe that our use of silane gas as opposed to
polysilicon allows us to control our material costs and deliver
our product more reliably than our competitors who manufacture
conventional solar modules based on crystalline silicon.
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Our roll-to-roll manufacturing process and equipment are
proprietary.
Most conventional crystalline solar
modules are produced using well-known processes and widely
available equipment. We believe the availability of conventional
crystalline technology has contributed to the proliferation of a
large number of solar companies that produce similar products.
We design, develop and manufacture our automated production
equipment based on proprietary process technologies, including
vacuum deposition of amorphous silicon and large-scale,
roll-to-roll
manufacturing processes. We believe that our access to these
technologies poses a significant barrier to entry for
competitors who may seek to produce products similar to our own.
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Our products generate more electricity in real world
conditions than many competing products, resulting in higher
returns on investment for our customers.
Solar
modules are typically priced by their rated power output
measured in watt peak determined in standard test conditions,
and most solar module manufacturers sell their products for a
similar price per watt. We believe our solar laminates generate
electricity earlier in the day and later into the evening and
perform better in diffuse light and at high temperatures than
conventional crystalline products. Our internal studies (based
on prevailing European climate conditions) have shown that our
solar laminates produce 8-20% more kilowatt hours of electricity
per rated kilowatt of power output on an annual basis than
similarly priced conventional solar modules. Higher
kilowatt-hours
per rated kilowatt of output increases our customers
return on investment, which we believe should result in greater
demand for our products relative to conventional solar modules
over time.
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S-3
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We have developed multiple sales channels for our solar
laminates.
Most conventional solar modules are
distributed through a relatively small number of specialty PV
distributors and installers. We sell our solar laminates through
this channel as well as through commercial roofing companies and
building contractors, which we believe gives us greater access
to end-users in our target markets.
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Our management team has significant experience scaling and
optimizing manufacturing operations.
Our current
management team possesses significant manufacturing expertise,
which we believe will become increasingly critical to our
success as we continue to grow and improve the productivity and
efficiency of our operations. Our President and Chief Executive
Officer has held a variety of positions in manufacturing
environments over a
15-year
period in which he has demonstrated the ability to improve
profitability, lead team-building and reorganization efforts and
integrate businesses of a global scale. Our Vice President of
Operations has held progressive manufacturing leadership roles
within the automotive industry for more than 21 years. Our
second tier of operations management also possesses many years
of relevant manufacturing experience and its members have been
integrated in the development and implementation of our current
growth and efficiency programs. We believe our current team has
the necessary skills and experience to successfully scale and
optimize our business as we move forward. For more information
about our directors, executive officers and key employees,
please see Management, beginning on page S-32.
|
Our
Strategy
Our key strategies include:
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Focus on customers where our products have a competitive
advantage, particularly within the BIPV
market.
The physical flexibility, durability and
lightweight nature of our solar laminates makes them an
attractive value proposition for the BIPV market, particularly
commercial rooftop applications, where our solar laminates can
be integrated with roofing materials and other building
products. Our solar laminates produce over 5.8
watts/ft
2
,
whereas many commercial buildings can be powered by less than
5 watts/ft
2
,
which represents a significant market opportunity for us.
Additionally, the BIPV market is attractive due to the
favorable incentives offered by France and Italy, two of the
largest solar markets, for BIPV products. Since BIPV products
are integrated into the buildings that ultimately consume the
power produced, they do not take the land space or use the
transmission infrastructure required by other solar products.
France and Italy are rewarding this factor in the form of higher
incentives. We believe the BIPV market, including commercial
roof top applications, represents the most attractive
opportunity for our solar laminates and we believe we will
continue to increase our sales within this market.
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|
Expand our manufacturing capacity to meet growing
demand
. We have embarked on an expansion plan to
reach 1 GW of nameplate capacity by 2012. We believe this
expansion is necessary to meet the rapidly growing demand for
our products. We currently have agreements in place to sell 94%
and 48% of our FY 2009 and FY 2010, respectively,
forecasted production volumes, each of which exceeds our current
nameplate capacity, and we have agreements totaling
approximately 600 MW through 2013. We currently operate two
manufacturing lines in Auburn Hills, Michigan totaling
58 MW of nameplate capacity and are ramping up production
at two new manufacturing lines in Greenville, Michigan with
additional nameplate capacity of 60 MW. We expect these new
lines to be operating at nameplate capacity by December 2008. We
also are installing two additional manufacturing lines at a
second location in Greenville, Michigan that will bring our
nameplate capacity to 178 MW. We expect these lines to be
operating at nameplate capacity before the end of FY 2009. We
will continue our manufacturing expansion to 300 MW of
nameplate capacity and then to 1 GW of nameplate capacity by
carefully evaluating sites globally based on analysis of
proximity to end markets, local cost-structure (including
incentives) and access to an appropriately skilled workforce. As
we plan for capacity expansion, we believe that our
differentiated technology and processes can be replicated
successfully.
|
|
|
|
Increase the percentage of our sales from take or
pay agreements.
Historically we entered
into long-term supply agreements with our customers that did not
include minimum purchase requirements. These orders were
completed on a current basis through purchase orders issued by
the customers as they required our PV laminates. In order to
increase visibility and certainty, and to plan our operations
accordingly, we
|
S-4
|
|
|
|
|
have recently focused our efforts on long-term take or
pay agreements that require the customer to purchase a
specified minimum amount of our products. We have and will
continue to increase the percentage of our products that are
sold under take or pay agreements as we continue to pursue our
strategy of demand-driven expansion.
|
|
|
|
|
|
Reduce the cost and increase conversion efficiency of our
products.
Although significant progress has been
made to date in reducing the cost and increasing the conversion
efficiency of our products, we continue to believe that
additional cost improvements and higher efficiency can be
achieved through:
|
|
|
|
|
|
Lowering raw material costs.
We already have
qualified suppliers, and are in the process of qualifying
additional suppliers, for certain commodity materials such as
stainless steel, grid wire and polymers. We will continue to
transition our supply chain to include multiple suppliers. We
believe that using a broader pool of suppliers will help lower
costs by mitigating the impact of an increase of prices by our
suppliers and possibly creating more competition among such
suppliers. As we significantly increase our volume, we should
also benefit from more competitive pricing which will help us
reduce our cost per watt.
|
|
|
|
Increasing manufacturing throughput and
yield.
We are continually improving the
manufacturing process to increase the productivity and
efficiency of our machines. We will continue to implement
manufacturing best practices to increase manufacturing
throughput and yield, which will enable us to achieve scale
benefits.
|
|
|
|
Increasing the conversion efficiency of our laminate
products.
We are continually improving the
conversion efficiency of our solar laminates. Higher conversion
efficiency allows the same amount of power to be produced with
less material, which translates into lower costs and higher
margins for our product. We will continue to review our product
designs and manufacturing processes to identify opportunities to
improve the conversion efficiency of our solar laminates.
|
|
|
|
|
|
Increase our sales presence in key solar
markets.
We have identified several markets where
we believe there are significant growth opportunities for our
solar laminates, including France, Spain, Italy and South Korea.
In several of these target countries, government incentives
favoring BIPV continue to drive the increased adoption of solar
power generated by BIPV systems. We are in the process of
establishing relationships with appropriate channel partners and
deploying additional sales resources to exploit these
opportunities.
|
|
|
|
Continue to improve our financial
performance.
We have historically generated
operating losses. However, our business achieved operating
profitability during our third fiscal quarter ended
March 31, 2008. This profitability delivered by our new
management team resulted from adoption of a focused product
strategy, growth in our manufacturing capacity, continued
technological advancements, cost cutting and sourcing
initiatives and a focus on manufacturing efficiency. We will
continue implementing cost saving initiatives and executing the
programs we have started, with a long range goal of raising our
gross margin to in excess of 40%.
|
|
|
|
Continue to innovate, and realize value from our technology
portfolio.
While our innovation and technological
advancement in solar power is most prominent, we also have
developed proprietary technologies outside of our core solar
business that we believe have substantial value. These include
technologies for NiMH batteries, solid hydrogen storage, metal
hydride fuel cells, biofuel reformation and phase-change random
access memory. We are currently reviewing strategic alternatives
to determine the best way to maximize value for each of these
technologies. We have in the past licensed several of our
technologies to third parties under royalty bearing agreements.
We have also partnered with third parties to commercialize
certain other technologies. We expect to consider licenses,
joint ventures and sales as means to realize value from our
technology portfolio in the future.
|
Description
of Concurrent Offering
Concurrently with this offering of common stock, we are offering
$225,000,000 of aggregate principal amount of %
convertible senior notes by means of a separate prospectus
supplement and accompanying prospectus. We
S-5
have also granted a
30-day
option to the underwriters of the convertible notes to purchase
a maximum of $33,750,000 additional principle amount of the
notes solely to cover over-allotments, if any. See
Description of the Share Lending Agreement and Concurrent
Offering of Convertible Notes for a description of the
convertible notes offering. We cannot give any assurance that
the convertible notes offering will be completed.
The delivery of shares of common stock being offered pursuant to
the share lending agreement is contingent on the closing of the
offering of convertible notes. We expect that delivery of the
borrowed shares will be made concurrently with the closing of
the convertible notes offering.
Recent
Developments
On June 6, 2008 we reached a settlement agreement with
International Acquisitions Services, Inc. (IAS),
Innovative Transportation Systems AG (ITS) and
Neville Chamberlain (together with IAS and ITS, the
InnoVan Plaintiffs). The settlement agreement
resolves a lawsuit instituted by the InnoVan Plaintiffs where
they claimed, among other things, that we made fraudulent
statements relating to the supply of battery products by Cobasys
to ITS, an entity created to manufacture and sell an electric
delivery vehicle known as the InnoVan. The net costs to us of
the litigation and settlement, including attorneys fees
and after certain third party reimbursements, is estimated to be
approximately $500,000.
Our
Corporate Information
We incorporated in the State of Delaware in 1964. Our principal
executive offices are located at 2956 Waterview Drive,
Rochester Hills, Michigan 48309. Our telephone number is
(248) 293-0440.
We maintain an Internet website at www.ovonic.com. We have not
incorporated by reference into this prospectus supplement the
information in, or that can be accessed through, our website,
and you should not consider it to be a part of this prospectus
supplement or the accompanying prospectus.
S-6
The
Offering
The following summary contains basic information about this
offering and our common stock and is not intended to be
complete. It does not contain all of the information that may be
important to you. For a more complete understanding of our
common stock, please refer to the section of this prospectus
supplement entitled Description of Common Stock.
|
|
|
Issuer
|
|
Energy Conversion Devices, Inc., a Delaware corporation.
|
|
Common Stock Offered in the Underwritten Equity Offering
|
|
1,270,000 shares.
|
|
Common Stock Offered as Borrowed Shares
|
|
3,438,500 shares, of which of
these borrowed shares will be initially offered at
$ per share and the remaining
borrowed shares will subsequently be sold at prevailing market
prices at the time of sale or at negotiated prices.
|
|
Total Common Stock Offered
|
|
4,708,500 shares.
|
|
Common Stock to be Outstanding After This Offering
|
|
shares.
|
|
Voting Rights
|
|
Shares of common stock are entitled to one vote per share on all
matters to be voted on by our stockholders. Generally, all
matters to be voted on by stockholders must be approved by a
majority of the votes entitled to be cast at a meeting by all
shares of common stock present in person or represented by
proxy, voting together as a single class.
|
|
Use of Proceeds
|
|
We intend to use the net proceeds from the sale of the
underwritten shares for expansion of our production capacity in
connection with the 1 GW plan and for general corporate purposes.
|
|
|
|
We will not receive any proceeds from the offering of the
borrowed shares, but we will receive a nominal lending fee for
the use of those shares. The shares borrower, who is an
affiliate of the underwriter, will receive all the proceeds from
the sale of the borrowed shares. See Description of the
Share Lending Agreement and Concurrent Offering of Convertible
Notes and Underwriting Borrowed
Shares.
|
|
|
|
See Use of Proceeds.
|
|
Nasdaq Symbol for Common Stock
|
|
Our common stock is listed on the Nasdaq Global Select Market
under the symbol ENER.
|
|
Risk Factors
|
|
You should carefully consider the information under the section
titled Risk Factors and all other information
included in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference before
investing in the common stock.
|
|
Concurrent Offering
|
|
Concurrently with this offering of common stock, we are offering
$225,000,000 of aggregate principal amount of convertible senior
notes ($258,750,000 if the underwriters exercise their
30-day
option to purchase additional convertible notes in full) by
means of a separate prospectus supplement and accompanying
prospectus. See Description of the Share Lending Agreement
and Concurrent Offering of Convertible Notes for a
description of the concurrent convertible notes offering.
|
S-7
Summary
Historical Consolidated Financial Data
The following summary consolidated financial information as of
and for the three years ended June 30, 2007, is derived
from our audited financial statements. The summary consolidated
financial information as of and for the nine months ended
March 31, 2008 and March 31, 2007, is derived from our
unaudited financial statements. Such financial information is
only a summary and should be read in conjunction with our
audited and unaudited financial statements, including the notes
thereto, and the Managements Discussion and Analysis
of Financial Condition and Results of Operations
incorporated by reference in this prospectus supplement. Figures
in the table below are in thousands, except share and per share
data.
Consolidated
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended March 31,
|
|
|
|
Year Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
159,391
|
|
|
$
|
64,731
|
|
|
|
$
|
96,014
|
|
|
$
|
84,431
|
|
|
$
|
51,944
|
|
Revenues from product development agreements
|
|
|
8,490
|
|
|
|
8,750
|
|
|
|
|
11,934
|
|
|
|
10,046
|
|
|
|
17,653
|
|
Other revenues
|
|
|
5,592
|
|
|
|
4,078
|
|
|
|
|
5,619
|
|
|
|
7,942
|
|
|
|
86,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUES
|
|
|
173,473
|
|
|
|
77,559
|
|
|
|
|
113,567
|
|
|
|
102,419
|
|
|
|
156,570
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales
|
|
|
122,109
|
|
|
|
54,122
|
|
|
|
|
81,241
|
|
|
|
67,271
|
|
|
|
51,409
|
|
Cost of revenues from product development agreements
|
|
|
5,391
|
|
|
|
5,726
|
|
|
|
|
7,684
|
|
|
|
7,710
|
|
|
|
14,012
|
|
Product development and research
|
|
|
7,699
|
|
|
|
15,338
|
|
|
|
|
19,745
|
|
|
|
19,909
|
|
|
|
16,529
|
|
Operating, selling, general and administrative (net)
|
|
|
35,730
|
|
|
|
24,611
|
|
|
|
|
35,179
|
|
|
|
31,535
|
|
|
|
28,652
|
|
Restructuring charges
|
|
|
7,457
|
|
|
|
|
|
|
|
|
5,385
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
6,925
|
|
|
|
3,961
|
|
|
|
|
6,835
|
|
|
|
3,215
|
|
|
|
2,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
185,311
|
|
|
|
103,758
|
|
|
|
|
156,069
|
|
|
|
129,640
|
|
|
|
113,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(11,838
|
)
|
|
|
(26,199
|
)
|
|
|
|
(42,502
|
)
|
|
|
(27,221
|
)
|
|
|
43,383
|
|
Interest income (expense)
|
|
|
5,971
|
|
|
|
14,374
|
|
|
|
|
17,540
|
|
|
|
8,474
|
|
|
|
624
|
|
Other non-operating income (expense)
|
|
|
(57
|
)
|
|
|
(261
|
)
|
|
|
|
(269
|
)
|
|
|
(163
|
)
|
|
|
6,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(5,924
|
)
|
|
|
(12,086
|
)
|
|
|
|
(25,231
|
)
|
|
|
(18,910
|
)
|
|
|
50,287
|
|
Income taxes
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM
|
|
$
|
(6,019
|
)
|
|
$
|
(12,086
|
)
|
|
|
$
|
(25,231
|
)
|
|
$
|
(18,910
|
)
|
|
$
|
49,462
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314
|
|
|
|
(1,393
|
)
|
Extraordinary item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(6,019
|
)
|
|
$
|
(12,086
|
)
|
|
|
$
|
(25,231
|
)
|
|
$
|
(18,596
|
)
|
|
$
|
50,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.15
|
)
|
|
$
|
(0.31
|
)
|
|
|
$
|
(0.64
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
1.80
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
(0.05
|
)
|
Extraordinary item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.15
|
)
|
|
$
|
(0.31
|
)
|
|
|
$
|
(0.64
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
1.83
|
|
Diluted net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.15
|
)
|
|
$
|
(0.31
|
)
|
|
|
$
|
(0.64
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
1.67
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
(0.05
|
)
|
Extraordinary item
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.15
|
)
|
|
$
|
(0.31
|
)
|
|
|
$
|
(0.64
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
1.70
|
|
Weighted average shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
40,099,639
|
|
|
|
39,294,971
|
|
|
|
|
39,389,401
|
|
|
|
32,495,709
|
|
|
|
27,465,767
|
|
Diluted
|
|
|
40,099,639
|
|
|
|
39,294,971
|
|
|
|
|
39,389,401
|
|
|
|
32,495,709
|
|
|
|
29,661,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
12,669
|
|
|
$
|
(1,332
|
)
|
|
|
$
|
(21,814
|
)
|
|
$
|
(21,419
|
)
|
|
$
|
(16,864
|
)
|
Capital expenditures
|
|
|
88,768
|
|
|
|
139,421
|
|
|
|
|
186,990
|
|
|
|
69,020
|
|
|
|
3,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities(1)
|
|
$
|
95,653
|
|
|
$
|
271,922
|
|
|
|
$
|
205,774
|
|
|
$
|
404,467
|
|
|
$
|
96,136
|
|
Property, plant & equipment, net
|
|
|
271,549
|
|
|
|
139,204
|
|
|
|
|
136,984
|
|
|
|
70,343
|
|
|
|
58,879
|
|
Total assets
|
|
|
605,144
|
|
|
|
612,688
|
|
|
|
|
600,679
|
|
|
|
596,342
|
|
|
|
198,063
|
|
Capital leases
|
|
|
23,717
|
|
|
|
24,376
|
|
|
|
|
24,252
|
|
|
|
24,728
|
|
|
|
8,964
|
|
Total liabilities
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|
|
78,665
|
|
|
|
77,262
|
|
|
|
|
75,172
|
|
|
|
59,321
|
|
|
|
42,343
|
|
Total stockholders equity
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|
|
526,479
|
|
|
|
535,427
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|
|
|
|
525,507
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|
|
|
537,021
|
|
|
|
155,720
|
|
|
|
|
(1)
|
|
Excludes restricted
investments
|
S-8
Risk
Factors
Investing in our common stock involves risks. You should
consider carefully the risks described below and the other
information contained or incorporated by reference in this
prospectus supplement or the accompanying prospectus before
making an investment decision. The risks and uncertainties
described below and in our other filings with the SEC,
incorporated by reference herein, are not the only ones facing
ECD. Additional risks and uncertainties not presently known to
us or that we currently consider immaterial may also adversely
affect us. If any of the following risks occur, our business,
financial condition or results of operations could be materially
harmed. In any such case, the value of our common stock could
decline and you could lose part or all of your investment.
Risks
Relating to Us and Our Business
We
have a history of losses and our future profitability is
uncertain; the failure to achieve sustainable profitability
could have a material adverse effect on our business, results of
operations, financial condition and cash flows.
Since our inception, we have incurred significant net losses,
including a net loss of $25.2 million for the fiscal year
ended June 30, 2007. Principally as a result of ongoing
operating losses, we had an accumulated deficit of
$329.0 million as of June 30, 2007. And for the nine
months ended March 31, 2008, we incurred an additional net
loss of $6.0 million resulting in an accumulated deficit of
$335.0 million as of March 31, 2008. However, we
generated net income of $7.0 million for the quarter ended
March 31, 2008, and our goal is to operate our business in
such a way that such profitability is sustainable over the long
term. Nonetheless, we may be unable to sustain or increase our
profitability in the future, which in turn could materially and
adversely impact our ability to repay the convertible notes
offered concurrently with this offering and could materially
decrease the market value of our common stock. We expect to
continue to make significant capital expenditures and anticipate
that our expenses will increase as we seek to:
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expand our manufacturing operations, whether domestically or
internationally;
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service our debt obligations;
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develop our distribution network;
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continue to research and develop our products and manufacturing
technologies;
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implement internal systems and infrastructure to support our
growth; and
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retain key members of management, retain other personnel and
hire additional personnel.
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We do not know whether our revenue will grow at all or grow
rapidly enough to absorb these costs, and our limited operating
history under our current business strategy and new management
team makes it difficult to assess the extent of these expenses
or their impact on our operating results. If we fail to sustain
profitability, our business, results of operations, financial
condition and cash flows could be materially adversely affected.
We
rely on a relatively small number of customers for a significant
portion of our sales, and the loss of or material reduction in
sales to any of these customers could have a material adverse
effect on our business, results of operations, financial
condition and cash flows.
During the year ended June 30, 2007, and for the nine
months ended March 31, 2008, our top five customers
accounted for 40% and 49% of our total revenue, respectively,
and our top customer, Solar Integrated Technologies, accounted
for 8% and 21% of our total revenue, respectively, in such
periods. We expect that these customers will continue to
represent a significant portion of our total revenue in the
future. Any loss of or material reduction in sales to any of our
top customers, especially Solar Integrated Technologies, would
be difficult to recapture, and could have a material adverse
effect on our business, results of operations, financial
condition and cash flows.
S-9
We
sell a substantial portion of our products to customers who are
not subject to minimum purchase obligations, and as a result we
face uncertainty as to future sales and inventory
levels.
Although we have entered into long-term supply agreements with
our customers, only a portion of these agreements contain
take or pay provisions that require the customer to
purchase a specified minimum amount of our products. The
remainder of these agreements generally do not include minimum
purchase requirements that obligate our customers to purchase
our products, but rather are completed in response to purchase
orders issued by the customers when they require our PV
products. We are seeking to increase the percentage of our
products that are sold under take or pay agreements. For
example, our top customer, Solar Integrated Technologies,
recently entered into a take or pay agreement extending to the
end of 2012. However, there is no assurance that we will be
successful or that take or pay provisions in such agreements
will be enforceable. If any of our significant customers
experiences a significant downturn in its business, or fails to
remain committed to our products, such customer may reduce or
discontinue purchases from us, especially any customer who is
not party to a take or pay agreement. If such actions occur, our
business, results of operations and financial condition will
likely be adversely affected.
We
face intense competition from other companies producing solar
energy and other renewable energy products; if we are unable to
compete successfully, our business, financial condition, results
of operations and prospects could be adversely
affected.
The solar energy market is intensely competitive and rapidly
evolving. The number of solar energy product manufacturers is
rapidly increasing due to the growth of actual and forecast
demand for solar energy products and the relatively low barriers
to entry. If we fail to attract and retain customers in our
target markets for our current and future core products, namely
solar laminates, we will be unable to increase our revenue and
market share. Some of our competitors have established more
prominent market positions, and if we fail to attract and retain
customers and establish successful distribution networks in our
target markets for our products, we will be unable to increase
our sales. Our competitors include Sharp Corporation, Q-Cells
AG, Kyocera Corporation, Sanyo Electric Co., Ltd., Sunpower
Corporation, Mitsubishi Electric Corporation and Suntech Power
Holdings Co., Ltd., all of which currently manufacture
predominantly crystalline or polycrystalline silicon solar
energy modules, and First Solar, Inc., which currently
manufactures thin film, cadmium telluride solar energy modules
on glass substrates.
We may also face competition from new entrants to the solar
energy market, including those that offer advanced technological
solutions or that have greater financial resources. A
significant number of our competitors are developing or
currently producing products based on advanced solar energy
technologies, including amorphous silicon, string ribbon and
nano technologies, which may eventually offer cost advantages
over the technologies currently used by us. A widespread
adoption of any of these technologies could result in a rapid
decline in our position in the solar energy market and our
revenue if we fail to adopt such technologies or develop
competitive technologies. Furthermore, the entire solar energy
industry also faces competition from conventional energy and
non-solar renewable energy providers.
Many of our existing and potential competitors have
substantially greater financial, technical, manufacturing and
other resources than we do. Our competitors greater size
in some cases provides them with a competitive advantage with
respect to manufacturing costs because of their economies of
scale and their ability to purchase raw materials at lower
prices. As a result, those competitors may have stronger
bargaining power with their suppliers and may have an advantage
over us in negotiating favorable pricing, as well as securing
supplies in times of shortages. Many of our competitors also
have greater brand name recognition, more established
distribution networks and larger customer bases. In addition,
many of our competitors have well-established relationships with
our current and potential customers and have extensive knowledge
of our target markets. As a result, they may be able to devote
more resources to the research, development, promotion and sale
of their products or respond more quickly to evolving industry
standards and changes in market conditions than we can. Our
failure to adapt to changing market conditions and to compete
successfully with existing or new competitors may materially and
adversely affect our financial condition and results of
operations.
S-10
If we
are unable to develop and market new and innovative products,
our business, financial condition and results of operations and
prospects could be adversely affected.
Our financial performance depends, in part, on our ability to
enhance our existing solar laminates, develop new and innovative
products and product applications, and adopt or develop new
technologies that continue to differentiate our products from
those of our competitors. The continued demand for our solar
laminates is premised in part on the features of our solar
laminates that distinguish them from the solar modules of our
competitors and the resulting unique product applications. These
features include physical flexibility, the ability of our
laminates to be integrated with roofing materials, low weight,
superior resistance to wind lift, durability, no roof
penetration and ease of installation. There are companies using
similar or competitive technologies that have introduced or
announced plans to introduce solar modules incorporating some or
all of these features. In addition, all solar modules compete
based on efficiency, and significant advances in the efficiency
of the solar modules of our competitors also could provide them
with a competitive advantage. If we fail to enhance our existing
solar laminates, develop new and innovative products and product
applications, or adopt or develop new technologies that continue
to differentiate our products from those of our competitors, our
business, financial condition and results of operations and
prospects could be adversely affected.
We
have focused our business strategy on, and invested significant
financial resources in, the BIPV segment of the PV market; if
demand for BIPV systems does not develop as we anticipate or
takes longer to develop than we anticipate, we may experience
difficulties in implementing our business
strategies.
Our current business strategy rests on increasing demand for
BIPV systems. We believe that there has been an increase in
demand for BIPV systems based in part on increasing interest and
customer support from the building industry, solar customers and
governments. As a result, we have invested, and will continue to
invest, significant financial resources in the production and
commercialization of our solar laminates for BIPV systems. If
the BIPV segment does not develop as we anticipate, or takes
longer to develop than we anticipate, we may experience
difficulties implementing our growth and business strategies.
This, in turn, could adversely impact our business, financial
condition and results of operations and prospects.
Our
expansion plans require substantial capital expenditures,
significant engineering efforts, timely delivery of
manufacturing equipment and dedicated management attention, and
our failure to complete these plans could have a material
adverse effect on the growth of our sales and
earnings.
Our future success depends, to a large extent, on our ability to
expand our production capacity. If we are unable to do so, we
will not be able to attain the desired level of economies of
scale in our operations or cut the marginal production cost to
the level necessary to effectively maintain our pricing and
other competitive advantages. We expect that we will make
substantial capital expenditures for our future growth. This
expansion has required, and will continue to require,
substantial capital expenditures, significant engineering
efforts, timely delivery of manufacturing equipment and
dedicated management attention, and is subject to significant
risks and uncertainties, including:
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We may experience cost overruns, construction delays, equipment
problems, including delays in manufacturing equipment deliveries
or deliveries of equipment that is damaged or does not meet our
specifications, and other operating difficulties;
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We will be required to obtain governmental approvals, permits or
documents of similar nature with respect to any new expansion
projects, but it is uncertain whether such approvals, permits or
documents will be obtained in a timely manner or at all;
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We may need to issue additional equity or debt securities in
order to finance the costs of developing the new facilities, the
timing and availability of which may be uncertain, and the terms
of which could be dilutive to our existing stockholders; and
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We may not have sufficient management resources to properly
oversee capacity expansion as currently planned.
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S-11
Any of these or similar difficulties could significantly delay
or otherwise constrain our ability to undertake our capacity
expansion plans as currently planned, which in turn would limit
our ability to increase sales, reduce marginal manufacturing
costs or otherwise improve our prospects and profitability.
We
rapidly are expanding our manufacturing capacity for solar
laminates in order to meet expected demand, and our revenue and
profits will depend upon our ability to successfully complete
this expansion and then to sell our solar laminates at higher
volumes to match our expanded capacity.
We plan to continue the expansion of our nameplate capacity from
the current 178 MW to an expected capacity exceeding
300 MW by 2010 and reaching 1 GW by 2012. This expansion
plan includes adding new facilities in Greenville, Michigan and
Tijuana, Mexico and other locations to be determined. Our
facilities are comprised of solar laminate production systems
that we are designing, developing, manufacturing, installing and
testing the equipment for this expansion internally and through
third parties. We may experience delays, additional or
unexpected costs, technology limitations and other adverse
events in connection with our capacity expansion projects,
including those associated with the equipment we are providing.
For example, we source some of the equipment that we use in our
manufacturing process from single source suppliers.
Additionally, there can be no assurance that market demand will
align with our expanding manufacturing capacity or that our
marketing capabilities at the expanded manufacturing volumes
will be successful. As a result, we may not be able to realize
revenue and profits based upon the expected additional capacity,
or we may experience delays or reductions in these revenue and
profits, and our business could be materially adversely affected.
We
expect that we will need to obtain additional financing to
continue to operate our business, including significant capital
expenditures to increase our production capacity, and financing
may be unavailable or available only on disadvantageous
terms.
We have in the past experienced substantial losses and negative
cash flow from operations and have required financing in order
to pursue the commercialization of products based on our
technologies. We expect that we will continue to need financing
to operate our business, possibly including for capital
expenditures to expand our production capacity. There can be no
assurance that the proceeds from the sale of the underwritten
shares and the concurrent convertible notes offering will be
sufficient to fund our manufacturing capacity expansion in our
United Solar Ovonic segment from the current 178 MW to
300 MW by 2010 and 1 GW by 2012. If additional financing is
required, there can be no assurance that such additional
financing will be available or that the terms of such additional
financing, if available, will be acceptable to us. If adequate
capital is not available or is not available on acceptable
terms, our ability to fund our operations, further develop and
expand our manufacturing operations and distribution network, or
otherwise respond to competitive pressures, would be
significantly limited and our ability to repay the notes could
be materially and adversely affected.
Demand
for our products may be adversely affected by the current
economic and credit environment, which could have an adverse
impact on our business, results of operations, financial
condition and cash flows.
The United States and international economies recently have
experienced (and continue to experience) a period of slow
economic growth. A near-term economic recovery is uncertain. In
particular, the current credit and housing crises, the increase
in U.S. sub-prime mortgage defaults, terrorist acts and
similar events, continued turmoil in the Middle East or war in
general could contribute to a slowdown of the market demand for
products that require significant initial capital expenditures,
including demand for solar modules and new residential and
commercial buildings. If the economic recovery slows down as a
result of the recent economic, political and social turmoil, or
if there are further terrorist attacks in the United States or
elsewhere, we may experience decreases in the demand for our
solar laminates, which may harm our operating results.
For example, we have benefited from historically low interest
rates that have made it more attractive for our customers to use
credit to purchase our products. Interest rates have fluctuated
recently and may eventually rise, which likely will increase the
cost of financing these purchases and may reduce our
customers profits and investors expected returns on
investment. Given the current credit environment, particularly
the tightening of the credit markets, there can be no assurance
that our customers will be able to borrow money on a timely
basis or on reasonable terms, which could have a negative impact
on their demand for our products. Our sales are affected by
S-12
interest rate fluctuations and the availability of liquidity,
and would be adversely affected by increases in interest rates
or liquidity constraints. Rising interest rates may also make
certain alternative investments more attractive to investors,
and therefore lead to a decline in demand for our solar
laminates, which could have a material adverse effect on our
business, results of operations, financial condition and cash
flows.
We are
vulnerable to risks associated with doing business in foreign
countries, the realization of which could have a material
adverse effect on our business, results of operations, financial
condition and cash flows.
We have a solar laminate manufacturing facility in Tijuana,
Mexico, and have established a joint venture in Tianjin, China,
to manufacture solar laminate. We expect that we will have to
expend significant management attention and financial resources
in order to successfully manage these and other international
operations. In addition, the marketing, distribution and
sale of our solar laminates outside the United States expose us
to a number of markets in which we have limited experience.
These operations subject us to a number of risks, including:
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the potential that we may be forced to forfeit, voluntarily or
involuntarily, foreign assets due to economic or political
instability in the countries in which we choose to locate our
manufacturing facilities;
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difficult and expensive compliance with the commercial and legal
requirements of international markets;
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difficulty in interpreting and enforcing contracts governed by
foreign law, which may be subject to multiple, conflicting and
changing laws, regulations and tax systems;
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inability to obtain, maintain or enforce intellectual property
rights;
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encountering trade barriers such as export requirements,
tariffs, currency exchange controls, taxes and other
restrictions and expenses, which could affect the competitive
pricing of our solar laminates and reduce our market share in
some countries;
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being subjected to additional withholding taxes or other tax on
our foreign income, tariffs and other restrictions on foreign
trade and investment, including currency exchange controls;
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being subjected to fluctuations in exchange rates which may
affect product demand and may affect our profitability in
U.S. dollars to the extent the price of our solar laminates
and cost of raw materials, labor and equipment is denominated in
a foreign currency;
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limitations on dividends or restrictions against repatriation of
earnings;
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difficulty in recruiting and retaining individuals skilled in
international business operations; and
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increased costs associated with maintaining international
marketing efforts.
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The realization of any of these risks may require that we devote
significant management time and financial resources to resolve
such risks. Further, such risks and the efforts to address such
risks may impede our ability to operate our business and to
achieve our strategic goals; either of which could have a
material adverse effect on our business, results of operations,
financial condition and cash flows.
If we
are unable to obtain key raw materials that meet our quality,
quantity and cost requirements, our business, financial
condition, results of operations and prospects could be
adversely affected.
The key raw materials used in our business are stainless steel,
resin-based polymers, nickel and high purity industrial gases,
primarily argon, nitrogen, hydrogen, silane and germane. Most of
our key raw materials are readily available from numerous
sources, however we have, in certain instances, selected
single-source suppliers for certain key raw materials and
components for efficiency, cost and quality. Our supply chain
and operations could be adversely impacted by the failure of the
suppliers of the single-sourced materials to provide us with the
raw materials that meet our quality, quantity and cost
requirements. In addition, significant shortages or price
increases in raw materials that are not single-sourced may
adversely impact our business. For example, the operations of
many of our competitors that produce conventional solar energy
products have been adversely impacted by the current shortage of
polysilicon (a key raw material for conventional solar energy
products), which has caused prices for those materials to rise
and limited availability of materials for manufacturing needs.
Similarly, the cost of certain
S-13
raw materials, in particular stainless steel and resin-based
polymer materials, has risen over the last several years, which
has impacted and may continue to impact our operations. Any
constraint on our production may cause us to be unable to meet
our obligations under customer purchase orders, and any increase
in the price of raw materials could constrain our margins,
either of which would adversely impact on our financial results.
We actively manage our raw materials and other supply costs
through purchasing strategies and product design and operating
improvements, however our management may not always be
effective, which could adversely impact our supply chain and
financial condition. Some of our suppliers may be unable to
supply our increasing demand for raw materials and components as
we implement our planned increase in production capacity. In
such event, we may be unable to identify new suppliers or
qualify their products for use on our production lines in a
timely manner and on commercially reasonable terms. Raw
materials and components from new suppliers also may be less
suited for our technology and yield solar laminates with lower
conversion efficiency, higher failure rates and higher rates of
degradation than solar laminates manufactured with the raw
materials from our current suppliers. Our failure to obtain raw
materials and components that meet our quality, quantity and
cost requirements in a timely manner could interrupt or impair
our ability to manufacture our solar laminates or increase our
manufacturing cost.
Significant
warranty and product liability claims could adversely affect our
business and results of operations.
We may be subject to warranty and product liability claims in
the event that our solar laminates fail to perform as expected
or if a failure of our laminates results, or is alleged to
result, in bodily injury, property damage or other damages.
Since our solar laminates are electricity producing devices, it
is possible that our products could result in injury, whether by
product malfunctions, defects, improper installation or other
causes. In addition, because the products we are developing
incorporate new technologies and use new installation methods,
we cannot predict whether or not product liability claims will
be brought against us in the future or the effect of any
resulting negative publicity on our business. Moreover, we may
not have adequate resources in the event of a successful claim
against us.
Our current standard product warranty for our solar laminates
includes a
20-year
warranty. We believe our warranty periods are competitive with
industry practice. Due to the long warranty period and our
proprietary technology, we bear the risk of extensive warranty
claims long after we have shipped product and recognized
revenue. Although we test our solar power products for
reliability and durability, we cannot ensure that we effectively
simulate the 20 year warranty period. Any increase in the
defect rate of our products would cause us to increase the
amount of warranty reserves and have a corresponding negative
impact on our results.
A successful warranty or product liability claim against us that
is not covered by insurance or is in excess of our available
insurance limits could require us to make significant payments
of damages. In addition, quality issues can have various other
ramifications, including delays in the recognition of revenue,
loss of revenue, loss of future sales opportunities, increased
costs associated with repairing or replacing products, and a
negative impact on our goodwill and reputation. The possibility
of future product failures could cause us to incur substantial
expenses to repair or replace defective products. Furthermore,
widespread product failures may damage our market reputation and
reduce our market share and cause sales to decline.
If we
lose key personnel or are unable to attract and retain qualified
personnel to maintain and expand our business, our business,
financial condition, results of operations and prospects could
be adversely affected.
Our efforts to transform from a multi-faceted research and
development company to a solar power-focused commercial
enterprise is being led by our recently reorganized management
team, including Mark Morelli, Joseph Conroy, Mike Fetcenko,
Subhendu Guha, Jay Knoll, Sanjeev Kumar, Arthur Rogers,
Marcelino Susas, Tom Toner, and Corby Whitaker. Our success is
highly dependent on the continued services of these individuals
and of a limited number of skilled managers, scientists and
technicians. The loss of any of these individuals could have a
material adverse effect on us. In addition, our success will
depend upon, among other factors, the recruitment and retention
of additional highly skilled and experienced management and
technical personnel. There can be no assurance that
S-14
we will be able to retain existing employees or to attract and
retain additional personnel on acceptable terms given the
competition for such personnel in industrial, academic and
nonprofit research sectors.
If
governments reduce or eliminate government incentives related to
solar power, our business, financial condition, results of
operations and prospects could be adversely
affected.
Today, the cost of solar power exceeds the cost of power
furnished by the electric utility grid in most locations. As a
result, federal, state and local government bodies in many
countries, most notably Germany, Japan, Italy, Spain, France,
Greece and the United States (at the national level and at the
state and local level), have provided incentives in the form of
rebates, tax credits and other incentives to end users,
distributors, system integrators and manufacturers of solar
power products to promote the use of solar energy to reduce
dependency on other forms of energy. These government economic
incentives could be reduced or eliminated. In particular,
political changes in a particular country could result in
significant reductions or eliminations of subsidies or economic
incentives. Also, electric utility companies or other energy
producers that have significant political lobbying powers may
seek changes in the relevant legislation in their markets (or in
the country as a whole) that may adversely affect the
development and commercial acceptance of solar energy. A
significant reduction in the scope or discontinuation of
government incentive programs, especially those in our target
markets, could cause demand for our products and our revenue to
decline, and have a material adverse effect on our business,
financial condition, results of operations and prospects.
Our
government product development and research contracts may result
in rights to inventions being assigned to the government, may be
terminated by unilateral government action, or we may be
unsuccessful in obtaining new government contracts to replace
those that have been terminated or completed.
We have several government product development and research
contracts. Any revenue or profits that may be derived by us from
these contracts will be substantially dependent upon the
government agencies willingness to continue to devote
their financial resources to our research and development
efforts. There can be no assurance that such financial resources
will be available or that such research and development efforts
will be successful. Our government contracts may be terminated
for the convenience of the government at any time, even if we
have fully performed our obligations under the contracts. Upon a
termination for convenience, we would generally only be entitled
to recover certain eligible costs and expenses we had incurred
prior to termination and would not be entitled to any other
payments or damages. Therefore, if government product
development and research contracts are terminated or completed
and we are unsuccessful in obtaining replacement government
contracts, our revenue and profits may decline and our business
may be adversely affected. In July 2007, we entered into a
three-year cooperative agreement with the Department of Energy
to increase the efficiency of our photovoltaic products, lower
material costs and reduce installation costs. The terms of this
agreement requires us to assign to the government inventions
conceived or reduced to practice during the course of the
agreement unless the government grants a waiver to such
requirement, in which case the government would retain, at a
minimum, a nonexclusive, paid-up license and so called
march-in rights to such inventions. We have applied
for, but have not yet received, a waiver of this requirement. If
the government does not grant a waiver, we would receive
nonexclusive, royalty-free license to such inventions.
Demand
for our products is affected by existing regulations concerning
the electrical utility industry; changes to such regulations may
present technical, regulatory and economic barriers to the
purchase and use of solar power products, which may
significantly reduce demand for our products.
The market for electricity generation products is influenced
heavily by foreign, federal, state and local government
regulations and policies concerning the electric utility
industry, as well as internal policies and regulations
promulgated by electric utilities. These regulations and
policies often relate to electricity pricing and technical
interconnection of customer-owned electricity generation. In the
United States (at both the national level and the state and
local level) and in a number of other countries, these
regulations and policies are being modified and may continue to
be modified.
Customer purchases of, or further investment in the research and
development of, alternative energy sources, including solar
power technology, could be deterred by these regulations and
policies, which could result in a
S-15
significant reduction in the potential demand for our solar
laminates. For example, utility companies commonly charge fees
to larger, industrial customers for disconnecting from the
electric grid or for having the capacity to use power from the
electric grid for
back-up
purposes. These fees could increase the cost to our customers of
using our solar laminates and make them less desirable, thereby
harming our business, prospects, results of operations and
financial condition.
We anticipate that our solar laminates and their installation
will be subject to oversight and regulation in accordance with
national, state and local laws and ordinances relating to
building codes, safety, environmental protection, utility
interconnection and metering and related matters. There is also
a burden in having to track the requirements of individual
countries and states and design equipment to comply with the
varying standards. Any new government regulations or utility
policies pertaining to our solar laminates may result in
significant additional expenses to us and our resellers and
their customers and, as a result, could cause a significant
reduction in demand for our solar laminates.
The
expansion of our business into new markets, such as residential,
may increase our exposure to certain risks, including class
action claims.
We are developing new applications of our solar technology,
including solar laminates to be integrated into residential
roofing materials. Our new solar technology applications may not
gain market acceptance and we may not otherwise be successful in
entering new markets, including the market for residential
applications. Moreover, entry into new markets may increase our
exposure to certain risks that we currently face or expose us to
new risks. For example, the residential construction market for
solar energy systems is exposed to different risks than the
commercial construction markets, including more acute
seasonality, sensitivity to interest rates and other
macroeconomic conditions, as well as enhanced legal exposure. In
particular, new home developments can result in class action
litigation when one or more homes in a development experiences
problems with roofing or power systems. If we enter the
residential market and experience product failures that create
property damage or personal injury, we may be exposed to greater
liability of a different nature than with respect to product
failures in commercial building applications.
We
have entered into joint ventures and licensing agreements to
develop and commercialize products based on our technologies; if
we fail to manage such joint ventures and licensing agreements
successfully, such failure could have a material adverse effect
on our business, results of operations, financial condition and
cash flows.
We have entered into licensing and joint venture agreements in
order to develop and commercialize certain products based on our
technologies. Any revenue or profits that may be derived by us
from these agreements will be substantially dependent upon our
ability to agree with our joint venture partners and licensees
about the management and operation of the joint ventures and
license agreements. In addition, any revenue or profits from
such agreements will be substantially dependent on the
willingness and ability of our joint venture partners and
licensees to devote their financial resources and manufacturing
and marketing capabilities to commercialize products based on
our technologies. There can be no assurance that we will agree
regarding the operation of such joint ventures and licensing
agreements, that required financial resources will be available
on mutually agreeable terms, or that commercialization efforts
will be successful. If we and our joint venture partners and
licensees are unable to agree with respect to the operation of
our joint ventures and licensing agreements, are unwilling or
unable to devote financial resources or are unable to
commercialize products based on our technologies, we may not be
able to realize revenue and profits based on our technologies
and our business could be materially adversely affected.
If we
are unsuccessful in our efforts to license or manufacture and
commercially sell products based on our Ovonic Materials segment
technologies, our business, results of operations, financial
condition and cash flows will be adversely
affected.
Our Ovonic Materials segment invents, designs and develops
materials and products based on our pioneering materials science
technology, principally amorphous and disordered materials. The
commercialization of products based on our technologies depends
upon consumer acceptance and the achievement and verification of
the overall performance, cost, reliability, efficiency and
safety of the products. There can be no assurance that our
research and
S-16
development efforts will be successful or that we, our licensees
or our joint ventures will be able to develop commercial
applications for our products and technologies. Further, the
areas in which we are developing technologies and products are
characterized by rapid and significant technological change.
Rapid technological development may result in our products
becoming obsolete or noncompetitive. If future products based on
our technologies cannot be developed for manufacture and sold
commercially or our products become obsolete or noncompetitive,
we may be unable to recover our investments. Although our joint
venture partners and licensees may have experience in
commercial-scale manufacturing, we have little such experience,
other than with respect to producing our solar laminates, and
there can be no assurance that we or our joint ventures and
licensees will expand or establish capabilities for
manufacturing products beyond those presently in existence. In
order to produce products on a commercial scale, we and our
joint ventures and licensees will be required to establish or
significantly increase manufacturing capabilities currently
being used to produce certain of our products. In addition, the
commercialization schedule may be delayed if we, our licensees
or our joint ventures experience delays in meeting development
goals, if products based on our technologies exhibit technical
defects, or if we, our licensees or our joint ventures are
unable to meet cost or performance goals. In this event,
potential purchasers of products based on our technologies may
choose alternative technologies and any delays could allow
potential competitors to gain market advantages. Either of these
events could adversely affect our business, results of
operations, financial condition and cash flows.
We may
become subject to legal or regulatory proceedings that may reach
unfavorable resolutions.
We are involved in legal proceedings arising in the normal
course of business. Due to the inherent uncertainties of legal
proceedings, the outcome of any such proceeding could be
unfavorable, and we may choose to make payments or enter into
other arrangements to settle such proceedings. Failure to settle
such proceedings could require us to pay damages or other
expenses, which could have a material adverse effect on our
financial condition or results of operations. We have been
subject to legal proceedings in the past involving the validity
and enforceability of certain of our patents. While such
patent-related legal proceedings have been resolved, such
proceedings can require the expenditure of substantial
management time and financial resources and can adversely affect
our financial performance. There can be no assurance that we
will not be a party to other legal proceedings in the future.
Compliance
with environmental regulations can be expensive, and
noncompliance with these regulations may require us to pay
substantial fines, suspend production or cease
operations.
The operation of our manufacturing facilities entails the use
and handling of potentially harmful substances, including toxic
and combustible explosive gases that pose inherent risks of
environmental damage or personal injury. Although we believe
that we are in material compliance with environmental laws,
rules and regulations, there can be no assurance that we will
not incur material costs and liabilities in the future because
of an accident or other event resulting in personal injury or
unauthorized release of such substances to the environment. We
may be liable, irrespective of fault, for material cleanup costs
or other liabilities incurred at these facilities in the event
of a release of hazardous substances into the environment by our
operations.
For example, our manufacturing process involves the controlled
storage and use of silane and germane, both of which are toxic
and combustible. Although we have rigorous safety procedures for
handling these materials, the risk of accidental injury from
such hazardous materials cannot be completely eliminated. If we
have an accident at one of our facilities involving a release of
these substances, we may be subject to civil
and/or
criminal penalties, including financial penalties and damages,
and possibly injunctions preventing us from continuing our
operations.
In addition, it is possible that increasingly strict
requirements imposed by environmental laws and enforcement
policies could require us to make significant capital
expenditures. To date such laws and regulations have not had a
significant impact on our operations, and we believe that we
have all necessary permits to conduct operations as they are
presently conducted. If more stringent laws and regulations are
adopted in the future, the costs of compliance with these new
laws and regulations could be substantial. The failure to comply
with present or future regulations could result in fines, third
party lawsuits, suspension of production or cessation of
operations.
S-17
Our
Cobasys affiliate faces uncertain prospects and is the subject
of a pending arbitration the outcome of which is uncertain but
may expose us to material liability if not settled or resolved
favorably.
Cobasys, our joint venture formed to commercialize our NiMH
battery technology, has generated losses since its formation.
Cobasys had losses of approximately $76.0 million and
obtained funding of approximately $84.0 million in 2007,
and in January 2008 Cobasys management forecast losses of
approximately $82.0-86.0 million and funding requirements
of approximately $92.0-94.0 million for 2008. The two
members of Cobasys our 91% owned subsidiary Ovonic
Battery Company (OBC) and CTV have not
approved a 2008 business plan and budget nor been able to agree
on a solution to Cobasys business issues or whether
Cobasys should continue as a going concern if it cannot be sold
in the near future. Until September 2007, CTV historically
funded Cobasys loss-generating operations through the
purchase of preferred interests cumulating in excess of
$168.0 million. From October 2007 through January 2008, CTV
declined to purchase preferred interests and funded Cobasys in a
manner that in our view violated the December 2, 2004
agreement among us, OBC and CTV that governs Cobasys (the
Operating Agreement) and applicable Michigan law.
Since February 2008, Cobasys has received funding support from a
customer in the form of a loan for capital equipment purchases
and a price increase on products sold to the customer. There is
no assurance that this customer funding support will continue on
these or other terms, what the future funding requirements may
be or that the support, if provided, will otherwise be
sufficient to permit Cobasys to continue as a going concern.
On September 10, 2007, CTV issued a notice of dispute and
filed claims in arbitration against us and OBC relating to
Cobasys. CTVs original arbitration claim asserted damages
in the amount of $162.0 million and sought injunctive and
other relief and alleged that we and OBC breached and
anticipatorily repudiated obligations to provide certain funding
to Cobasys under the Operating Agreement. CTV subsequently filed
a supplemental notice of dispute amending its claims to assert
that we and OBC had dishonored CTVs preferred interest in
Cobasys and that OBC had breached its obligation to use diligent
efforts to approve a 2008 annual budget for Cobasys. At a
hearing on January
28-29,
2008,
CTV requested that the arbitrator declare that we and OBC be
obligated to fund our share of Cobasys necessary costs and
expenses through capital contributions favored by CTV but
opposed by OBC. We and OBC requested that the arbitrator declare
that under the Operating Agreement neither Cobasys member is
required to make any capital contribution absent a unanimously
approved annual budget and an agreement by the members that a
capital contribution must be made. Since the operating costs and
expenses of Cobasys are uncertain, we are unable to assess the
magnitude of our liability if CTVs request is granted,
however such liability could be material.
However, prior to any ruling by the arbitrator on these
competing claims, the parties suspended the arbitration pursuant
to an interim settlement agreement among us, OBC and CTV in
order to pursue the potential sale of Cobasys to a third party.
Sale negotiations have been ongoing during which the parties to
the arbitration have on nine occasions amended the interim
settlement agreement to extend the deadline for timely
consummation. There is no assurance that the sale will be
completed by June 30, 2008, the current deadline, and, if
not completed, that the parties will again extend the interim
settlement agreement. If the sale of Cobasys does not close by
that date and any of we, OBC or CTV determine not to further
extend our interim settlement agreement, we, OBC or CTV could
resume the arbitration and receive a ruling from the arbitrator.
We cannot assure you that a sale will be timely consummated or
consummated at all. If not timely consummated and the
arbitration is resumed, we cannot assure you that we and OBC
would prevail or otherwise avoid material liability.
If we
are unable to protect our intellectual property and our
proprietary technology including our trade secrets and other
confidential information, our operating results, financial
condition and future growth prospects may be adversely
impacted.
Our success depends in part on our ability to obtain and
maintain intellectual property protection for products based on
our technologies. Our policy is to seek to protect our products
and technologies by, among other methods, filing United States
and foreign patent applications related to our proprietary
technology, inventions and improvements. We maintain an
extensive patent portfolio presently consisting of over 300
U.S. patents and over 500 foreign counterparts (including
patents assigned to a custodial owner to support the Cobasys
business). The patent positions of companies like ours generally
are uncertain and involve complex legal and factual questions.
Our ability to maintain our proprietary position for our
technology will depend on our success in obtaining effective
patent claims
S-18
and enforcing those claims once granted. We do not know whether
any of our patent applications will result in the issuance of
any patents. Our issued patents and those that may issue in the
future may be challenged, invalidated, rendered unenforceable or
circumvented, which could limit our ability to stop competitors
from marketing related products or the length or terms of patent
protection that we may have for our products and technologies.
In addition, the rights granted under any issued patents may not
provide us with competitive advantages against competitors with
similar products or technologies. Furthermore, our competitors
may independently develop similar technologies or duplicate
technology developed by us in a manner that does not infringe
our patents or other intellectual property. Because of the
extensive time required for development and commercialization of
products based on our technologies, it is possible that, before
these products can be commercialized, any related patents may
expire or remain in force for only a short period following
commercialization, thereby reducing any advantages of these
patents and making it unlikely that we will be able to recover
investments we have made to develop our technologies and
products based on our technologies.
In addition to patent protection, we also rely on protection of
trade secrets, know-how and confidential and proprietary
information. To maintain the confidentiality of trade secrets
and proprietary information, we have entered into
confidentiality agreements with our employees, agents and
consultants upon the commencement of their relationships with
us. These agreements require that all confidential information
developed by the individual or made known to the individual by
us during the course of the individuals relationship with
us be kept confidential and not disclosed to third parties. Our
agreements with employees also provide that inventions conceived
by the individual in the course of rendering services to us will
be our exclusive property. Individuals with whom we have these
agreements may not comply with their terms. In the event of the
unauthorized use or disclosure of our trade secrets or
proprietary information, these agreements, even if obtained, may
not provide meaningful protection for our trade secrets or other
confidential information. To the extent that our employees or
consultants use technology or know-how owned by others in their
work for us, disputes may arise as to the rights in related
inventions. Adequate remedies may not exist in the event of
unauthorized use or disclosure of our confidential information.
The disclosure of our trade secrets would impair our competitive
position and could have a material adverse effect on our
operating results, financial condition and future growth
prospects.
We may
be involved in lawsuits to protect or enforce our patents, which
could be expensive and time consuming.
Competitors may infringe our patents. To counter infringement or
unauthorized use, we may be required to file patent infringement
claims, which can be expensive and time-consuming. In addition,
in an infringement proceeding, a court may decide that a patent
of ours is not valid or is unenforceable, or may refuse to stop
the other party from using the technology at issue on the
grounds that our patents do not cover its technology. An adverse
determination of any litigation or defense proceedings could put
one or more of our patents at risk of being invalidated or
interpreted narrowly and could put our patent applications at
risk of not issuing.
Interference proceedings brought by the United States Patent and
Trademark Office may be necessary to determine the priority of
inventions with respect to our patent applications. Litigation
or interference proceedings may fail and, even if successful,
may result in substantial costs and be a distraction to our
management. We may not be able to prevent misappropriation of
our proprietary rights, particularly in countries where the laws
may not protect such rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery
required in connection with intellectual property litigation,
there is a risk that some of our confidential information could
be compromised by disclosure. In addition, during the course of
this litigation, there could be public announcements of the
results of hearings, motions or other interim proceedings or
developments. If securities analysts or investors perceive these
results to be negative, it could have a substantial adverse
effect on the price of our common stock. We may not prevail in
any litigation or interference proceeding in which we are
involved. Even if we do prevail, these proceedings can be
expensive and distract our management.
S-19
Third
parties may own or control patents or patent applications that
are infringed by our products or technologies.
Our success depends in part on avoiding the infringement of
other parties patents and proprietary rights. In the
United States and most other countries, patent applications are
published 18 months after filing. As a result, there may be
patents of which we are unaware, and avoiding patent
infringement may be difficult. We also may infringe third-party
patents or patent applications inadvertently.
If a patent infringement suit were brought against us, we and
our joint venture partners and licensees could be forced to stop
or delay research, development, manufacturing or sales of
products based on our technologies in the country or countries
covered by the patent we are alleged to infringe, unless we can
obtain a license from the patent holder or spend time and money
to design around or avoid the intellectual property. We also may
be required to pay substantial damages to the patent holder in
the event of an infringement. Under some circumstances in the
United States, these damages could be triple the actual damages
the patent holder incurs. If we have supplied infringing
products to third parties for marketing or licensed third
parties to manufacture, use or market infringing products, we
may be obligated to indemnify these third parties for any
damages they may be required to pay to the patent holder and for
any losses the third parties may sustain themselves as the
result of lost sales or damages paid to the patent holder. A
license from the alleged patent holder may not be available on
acceptable terms, or at all, particularly if the third party is
developing or marketing a product competitive with products
based on our technologies. Even if we were able to obtain a
license, the rights may be nonexclusive, which would give our
competitors access to the same intellectual property.
Any successful infringement action brought against us may also
adversely affect marketing of products based on our technologies
in other markets not covered by the infringement action.
Furthermore, we may suffer adverse consequences from a
successful infringement action against us even if the action is
subsequently reversed on appeal, nullified through another
action or resolved by settlement with the patent holder. The
damages or other remedies awarded, if any, may be significant.
As a result, any infringement action against us would likely
harm our competitive position, be costly and require significant
time and attention of our key management and technical
personnel. In addition, such an occurrence could have a
substantial adverse effect on the price of our common stock.
The
credit facility entered into by our subsidiaries, United Solar
Ovonic Corporation and United Solar Ovonic LLC, contains
covenant restrictions that may limit our ability to operate our
business.
We conduct substantially all of our United Solar Ovonic segment
operations through our subsidiaries United Solar Ovonic
Corporation and United Solar Ovonic LLC. For example, our cash
flows from that segment are dependent on the distributions to us
by United Solar Ovonic Corporation and United Solar Ovonic LLC.
In February 2008, United Solar Ovonic Corporation and United
Solar Ovonic LLC entered into a secured credit facility with an
aggregate commitment of up to $55.0 million, of which we
are a guarantor. The credit facility contains, and any other
future debt agreements may contain, covenant restrictions that
may effectively limit our ability to operate our business, due
to restrictions on our or our subsidiaries ability to,
among other things:
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incur additional debt or issue guarantees;
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create liens;
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make certain investments;
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enter into transactions with our affiliates;
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sell certain assets;
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make certain restricted payments;
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declare or pay dividends or make other distributions to
stockholders; and
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merge or consolidate with any person.
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As a result of these covenants, our ability to respond to
changes in business and economic conditions and to obtain
additional financing, if needed, may be significantly
restricted, and we may be prevented from engaging in
S-20
transactions that might otherwise be beneficial to us due to the
restrictions imposed by the credit facility. In addition, the
failure to comply with these covenants could result in a
default, which could permit the lenders and debtholders to
accelerate such debt.
As a
result of the concurrent convertible notes offering, we will
have a significant amount of debt outstanding. Our indebtedness,
along with our other contractual commitments, could adversely
affect our business, financial condition and results of
operations, as well as our ability to meet any of our payment
obligations under the notes and our other debt.
Together with our subsidiaries, as a result of the concurrent
notes offering we will have a significant amount of debt and
debt service requirements. As of March 31, 2008, after
giving effect to the concurrent notes offering, we would have
had approximately $225.0 million of outstanding debt for
borrowed money, or approximately $258.8 million if the
underwriters option to purchase additional notes is
exercised in full.
This level of debt and related debt service could have
significant consequences on our future operations, including:
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making it more difficult for us to meet our payment and other
obligations under the notes and our other outstanding debt;
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resulting in an event of default if we and our subsidiaries fail
to comply with covenants contained in our debt agreements, which
could result in such debt becoming immediately due and payable;
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reducing the availability of our cash flow to fund working
capital, capital expenditures, acquisitions and other general
corporate purposes, and limiting our ability to obtain
additional financing for these purposes;
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subjecting us to the risk of increased sensitivity to interest
rate increases on our indebtedness with variable interest rates,
including borrowings under our new credit facility;
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limiting our flexibility in planning for, or reacting to, and
increasing our vulnerability to, changes in our business, the
industry in which we operate and the general economy; and
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placing us at a competitive disadvantage compared to our
competitors that have less debt or are less leveraged.
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Any of the above-listed factors could have an adverse effect on
our business, financial condition and results of operations and
our ability to meet our payment obligations under the notes and
our other debt.
Our ability to meet our payment and other obligations under our
debt instruments depends on our ability to generate significant
cash flow in the future. This, to some extent, is subject to
general economic, financial, competitive, legislative and
regulatory factors as well as other factors that are beyond our
control. We cannot assure you that our business will generate
cash flow from operations, or that future borrowings will be
available to us under existing or any future credit facilities
or otherwise, in an amount sufficient to enable us to meet our
payment obligations under the notes and our other debt and to
fund other liquidity needs. If we are not able to generate
sufficient cash flow to service our debt obligations, we may
need to refinance or restructure our debt, including the notes,
sell assets, reduce or delay capital investments, or seek to
raise additional capital. If we are unable to implement one or
more of these alternatives, we may not be able to meet our
payment obligations under the convertible notes being offered
concurrently and our other debt and other obligations.
Risks
Relating to the Common Stock
The
price of our common stock may fluctuate significantly, and a
liquid trading market for our common stock may not be sustained.
Such volatility may prompt costly securities class action
litigation.
The trading price of our common stock could be subject to wide
fluctuations due to the factors discussed in this risk factors
section and in the risk factors incorporated by reference. In
addition, the stock market in general, and the Nasdaq Global
Select Market and the securities of technology companies in
particular, have experienced extreme price and volume
fluctuations. These trading prices and valuations, including our
own market valuation and those of companies in our industry
generally, may not be sustainable. These broad market and
industry factors may decrease
S-21
the market price of our common stock, regardless of our actual
operating performance. In addition, in the past, following
periods of volatility in the overall market and the market price
of a companys securities, securities class action
litigation has often been instituted against such company. This
litigation, if instituted against us, could result in
substantial costs and a diversion of our managements
attention and resources.
Substantial
future sales or other dispositions of our common stock or other
securities could cause our stock price to fall.
Sales of a substantial number of shares of our common stock or
other equity-related securities in the public market could
depress the market price of our common stock and impair our
ability to raise capital through the sale of additional equity
securities. We cannot predict the effect that future sales of
our common stock or other equity-related securities could have
on the market price of our common stock. The price of our common
stock could be affected by possible sales of our common stock by
investors who view the convertible notes, offered concurrently
with this offering, as a more attractive means of equity
participation in our company and by hedging or arbitrage trading
activity that we expect to develop involving our common stock.
The
effect of the issuance of our shares of common stock in this
offering pursuant to the share lending agreement, which issuance
is being made to facilitate sales of our common stock in short
sale transactions by purchasers of certain of our securities,
may be to lower the market price of our common
stock.
The increase in the number of outstanding shares of our common
stock in connection with the share lending agreement could have
a negative effect on the market price of our common stock. In
addition, because the borrower has agreed to use such sales to
facilitate the establishment by the note investors, the market
price of our common stock could be further negatively affected
by these or other short sales of our common stock.
If
securities or industry analysts do not publish research or
reports about us, our business or our market, or if they change
their recommendations regarding our stock, our business or our
market adversely, our stock price and trading volume could
decline.
The trading market for our common stock is influenced by the
research and reports that industry or securities analysts
publish about us, our business and our market. If one or more of
the analysts who cover us changes their recommendation regarding
our stock adversely, our stock price would likely decline. If
one or more of these analysts ceases coverage of our company or
fails to regularly publish reports on us, we could lose
visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
Changes
in the accounting treatment of certain of our existing
securities and/or the securities we are offering by this
prospectus supplement and the accompanying prospectus could
decrease our earnings per share and potentially our stock
price.
The borrowed shares we are offering must be returned to us prior
to June 15, 2013 under the share lending agreement, or
earlier in certain circumstances. Because of this requirement we
believe that under U.S. GAAP as presently in effect, the
borrowed shares will not be considered outstanding for the
purpose of computing and reporting our earnings per share. If
accounting guidelines were to change in the future and we become
required to treat the borrowed shares as outstanding for
purposes of computing earnings per share, our earnings per share
would be reduced. Any reduction in our earnings per share could
cause our stock price to decrease, possibly significantly.
In addition, there may be, in the future, potentially new or
different accounting pronouncements or regulatory rulings, which
could impact the way we are required to account for certain of
our existing securities, including the securities we are
offering in the concurrent convertible notes offering, and which
may have an adverse impact on our future financial condition and
results of operations. With respect to the notes offered in the
concurrent convertible notes offering, we are required under
U.S. GAAP as presently in effect to include in outstanding
shares for purposes of computing earnings per share only a
number of shares underlying the notes that, at the end of a
given quarter, have a value in excess of the outstanding
principal amount of the notes. This is because of the net
share settlement feature of the notes, under which we are
required to pay the principal amount of the notes in cash. The
accounting method for net share settled convertible securities
has recently been revised by the Financial Accounting Standards
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Board (FASB). On May 9, 2008, FASB approved a staff
position statement APB
14-1,
Accounting for Convertible Debt Instruments That May Be Settled
in Cash Upon Conversion (Including Partial Cash
Settlement) providing a new method of accounting for
net share settled convertible securities under which the debt
and equity components of the security would be bifurcated and
accounted for separately. The change will take effect for fiscal
periods beginning after December 15, 2008 and will increase
the interest expense reported on our statement of operations
and, consequently, reduce our operating results.
Delaware
law and our amended and restated certificate of incorporation
and bylaws contain anti-takeover provisions that could delay or
discourage takeover attempts that stockholders may consider
favorable.
Provisions in our amended and restated certificate of
incorporation and bylaws may have the effect of delaying or
preventing a change of control or changes in our management.
These provisions include the following:
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the right of the board of directors to elect a director to fill
a vacancy created by the expansion of the board of directors;
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the prohibition of cumulative voting in the election of
directors, which would otherwise allow less than a majority of
stockholders to elect director candidates;
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the requirement for advance notice for nominations for election
to the board of directors or for proposing matters that can be
acted upon at a stockholders meeting; and
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no action can be taken by stockholders except at an annual or
special meeting of the stockholders called in accordance with
our bylaws, and stockholders may not act by written
consent; and
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our board of directors will be able to alter our bylaws without
obtaining stockholder approval.
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These provisions could discourage proxy contests and make it
more difficult for you and other stockholders to elect directors
and take other corporate actions. In addition, we are governed
by the provisions of Section 203 of the Delaware General
Corporation Law, or the DGCL. These provisions may prohibit
large stockholders, particularly those owning 15% or more of our
outstanding voting stock, from merging or combining with us. As
a result, these provisions could limit the price that investors
are willing to pay in the future for shares of our common stock.
In addition, our board of directors has the authority to adopt a
stockholder rights plan without stockholder approval, which may
cause substantial dilution to a person or group that attempts to
acquire us on terms that are not approved by our board of
directors. Any such rights plan, together with the provisions
described above, may have the effect of delaying, deferring or
discouraging a transaction that may otherwise be in your best
interests.
Provisions
of the notes being offered in the concurrent convertible notes
offering could discourage an acquisition of us by a third
party.
Certain provisions of the convertible notes being offered
concurrently with this offering could make it more difficult or
more expensive for a third party to acquire us. Upon the
occurrence of certain transactions constituting a fundamental
change, holders of the notes will have the right, at their
option, to require us to repurchase, at a cash repurchase price
equal to 100% of the principal amount plus accrued and unpaid
interest on the notes, all of their notes or any portion of the
principal amount of such notes in integral multiples of $1,000.
We also may be required to issue additional shares of our common
stock upon conversion of such notes in the event of certain
fundamental changes. If the concurrent convertible notes
offering is completed, these provisions could discourage our
acquisition by a third party.
We may
issue preferred stock which could have rights that are senior to
the rights of our common stock and that may, if convertible into
common stock, dilute the value of our common
stock.
In 2007, we sought stockholder approval to amend our certificate
of incorporation to authorize the issuance of up to
20,000,000 shares of preferred stock. We withdrew that
proposal prior to a vote at our stockholders meeting, but in the
future we may again seek stockholder approval for the same or a
similar amendment, which if adopted by favorable vote of a
majority of our outstanding voting shares, would thereafter
permit us to issue preferred shares
S-23
without further stockholder approval. The shares may have
dividend, voting, liquidation and other rights and preferences
that are senior to the rights of our common stock.
In addition, such shares of preferred stock may be convertible
into shares of our common stock. Conversion of shares of our
preferred stock into shares of our common stock may dilute the
value of our common stock. The rights and preferences of any
class or series of preferred stock issued by us would be
established by our board of directors in its sole discretion.
Our
management has broad discretion over the use of proceeds from
this offering.
Our management has significant flexibility in applying the
proceeds that we receive from this offering. Although we have
indicated our intent to use the proceeds from this offering to
expand our manufacturing capacity and for other general
corporate purposes, our board retains significant discretion
with respect to the use of proceeds. In addition, the proceeds
of this offering may be used in a manner which does not generate
a favorable return for us.
S-24
Capitalization
The following table sets forth our capitalization as of
March 31, 2008:
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on an actual basis; and
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on an as adjusted basis to reflect (i) the completion of
this offering of 4,708,500 shares of our common stock,
including (a) our receipt of the proceeds from the sale of
the 1,270,000 underwritten shares at an offering price of
$
per share (assuming the underwriters option to purchase
additional shares is not exercised) and (b) our receipt of
the nominal lending fees from the borrowed shares and
(ii) the completion of our sale of the convertible notes in
the concurrent offering of convertible notes and the receipt of
the proceeds therefrom (assuming the underwriters option
to purchase additional convertible notes is not exercised).
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You should read this table in conjunction with the following,
which are incorporated by reference into this prospectus
supplement:
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the historical financial statements of ECD as of and for the
nine months ended March 31, 2008, included in ECDs
quarterly report on
Form 10-Q
for the quarter ended March 31, 2008; and
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the historical financial statements of ECD as of and for the
years ended June 30, 2007, June 30, 2006 and
June 30, 2005, included in ECDs annual report on
Form 10-K
for the fiscal year ended June 30, 2007.
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March 31, 2008
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Actual
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As Adjusted
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(Dollars in thousands)
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Debt:
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Obligations under capital leases and notes payable
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$
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23,717
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$
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% convertible notes due 2013
offered in the concurrent offering
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Total debt
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23,717
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Common Stock, par value $0.01 per share
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Authorized 100,000,000 shares actual and as
adjusted at March 31, 2008
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Issued and outstanding 40,333,907 shares at
March 31, 2008, shares as adjusted
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403
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Additional paid-in capital
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862,828
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Accumulated other comprehensive loss
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(335,037
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)
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Accumulated deficit
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(1,715
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Total stockholders equity
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526,479
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Total capitalization
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$
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550,196
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The number of shares of common stock on an as adjusted basis
shown as issued and outstanding in the table above is based on
the number of shares of our common stock outstanding as of
March 31, 2008, giving effect to the adjustments described
above, but excluding:
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957,913 shares of common stock issuable upon the exercise
of options outstanding as of March 31, 2008, at a weighted
average exercise price of $20.99 per share; and
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2,434,350 shares of common stock reserved for future
issuance as of March 31, 2008, under our various equity
incentive plans and other arrangements.
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S-25
Use of
Proceeds
The net proceeds from the sale of the underwritten shares
offered by this prospectus supplement and the accompanying
prospectus will be approximately
$ million after deducting the
underwriters discounts and estimated offering expenses,
assuming the underwriters over-allotment option is not
exercised. The net proceeds from the sale of the convertible
notes in our concurrent offering of convertible notes will be
approximately $218.0 million, after deducting the
underwriters discounts and estimated offering expenses,
again assuming the underwriters over-allotment option is
not exercised. We intend to use the net proceeds from sale of
the underwritten shares for expansion of our production capacity
in connection with the 1 GW plan and for general corporate
purposes.
We will not receive any proceeds from the borrowed shares
offered by this prospectus supplement and the accompanying
prospectus. Pursuant to the share lending agreement, we will
receive a nominal lending fee of $0.01 for each share that we
lend to CSI, which will be used for general corporate purposes.
See Description of the Share Lending Agreement and
Concurrent Offering of Convertible Notes and
Underwriting Borrowed Shares. CSI, or
its affiliates, will receive the proceeds from the sale of the
borrowed shares and CSI, or its affiliates, has agreed to use
those shares to facilitate privately negotiated transactions or
short sales by which investors hedge their investments in our
convertible notes, which are being offered in a concurrent
registered offering, and, with our consent, other securities
that we may issue in the future.
S-26
Price
Range of Our Common Stock and Dividend Policy
Our common stock is listed on the Nasdaq Global Select Market
under the symbol ENER. Set forth below, for the
periods indicated, are the
intra-day
high and low sale prices per share of common stock as reported
by the Nasdaq Global Select Market.
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High
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Low
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Fiscal Year Ended June 30, 2005
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First Quarter
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$
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14.89
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$
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9.62
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Second Quarter
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23.45
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12.50
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Third Quarter
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23.42
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15.64
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Fourth Quarter
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26.20
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16.27
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Fiscal Year Ended June 30, 2006
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First Quarter
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$
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46.44
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$
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22.31
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Second Quarter
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46.88
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28.76
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Third Quarter
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57.84
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39.81
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Fourth Quarter
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56.00
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31.31
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Fiscal Year Ended June 30, 2007
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First Quarter
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$
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38.98
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$
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29.03
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Second Quarter
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41.07
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33.80
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Third Quarter
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37.24
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27.21
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Fourth Quarter
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40.10
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29.26
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Fiscal Year Ended June 30, 2008
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First Quarter
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$
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36.00
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$
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22.26
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Second Quarter
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36.45
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22.90
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Third Quarter
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34.28
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20.47
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On June 11, 2008, the last reported sale price of our
common stock on the Nasdaq Global Select Market was
$64.24 per share.
We have never declared or paid any cash dividends on our common
stock, and we do not currently intend to pay any cash dividends
on our common stock in the foreseeable future. We intend to
retain future earnings, if any, to finance the operation and
expansion of our business.
S-27
Management
Executive
Officers, Directors and Other Senior Management
The following table sets forth information regarding the
executive officers, directors and other significant members of
our senior management team at June 10, 2008.
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Name
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Age
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Office
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Office Held Since
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Mark D.
Morelli
(1)
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44
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President, Chief Executive Officer and Director
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2007
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Joseph Conroy
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44
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Vice President, Operations
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2008
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Mike A. Fetcenko
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50
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Vice President Ovonic Materials
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2008
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Subhendu
Guha
(1)
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65
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Senior Vice President, Photovoltaic Technology
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2007
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Jay B.
Knoll
(1)
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45
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Senior Vice President, General Counsel and Chief Administrative
Officer
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2006
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Sanjeev
Kumar
(1)
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44
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Vice President and Chief Financial Officer
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2006
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Arthur A. Rogers
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57
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Vice President of HR and Administration
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2007
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Marcelino Susas
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41
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Vice President of Strategic Marketing
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2008
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Tom Toner
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49
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Vice President System Engineering
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2008
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Corby C. Whitaker
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38
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Vice President of Global Sales
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2008
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Joseph A. Avila
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57
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Director
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2007
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Christopher P. Belden
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47
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Director
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2008
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Robert I. Frey
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64
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Director
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2004
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William J. Ketelhut
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55
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Director
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2004
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Florence I. Metz
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78
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Director
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1995
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Stephen Rabinowitz
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65
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Director and Chairman of the Board
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2004
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George A. Schreiber, Jr.
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60
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Director
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2006
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(1)
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This individual is an executive officer of the Company (within
the meaning of
Rules 3b-7
and 16a-1 under the Securities Exchange Act of 1934).
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Executive
Officers and Other Senior Management Officers of the
Company
Mark D. Morelli
is President, Chief Executive
Officer and a Director of ECD. He served as President of Carrier
Commercial Refrigeration, a division of Carrier Corporation,
from April 2006 until he joined ECD in 2007. From June 2004 to
April 2006, Mr. Morelli was Vice President and General
Manager of the Marine Container Business with Carrier
Transicold, and from September 2002 to June 2004 he was the
Managing Director of Transport Air Conditioning with
Carrier Transicold. Prior to 2002, he also served as Vice
President Marketing & Strategy for United Technologies
Corporation and in various positions for Carrier. His customer
and strategic business experience includes developing and
marketing building-integrated products.
Joseph Conroy
has served as Vice President,
Operations of ECD since January 2008. Before coming to ECD,
Mr. Conroy had been at American Axle &
Manufacturing, Inc. since March 1994. While with American
Axle & Manufacturing, Inc., Mr. Conroy
served as general manager of the Driveline Americas Division,
the companys largest division, from July 2006 until he
joined ECD, general manager of the Metal Formed Products
Division from July 2004 to July 2006, and plant manager for the
Three Rivers Driveline facility from January 2003 to July 2004.
He holds a B.S.M.E. from General Motors Institute (GMI), now
known as Kettering University, and an MBA from Wayne State
University.
S-28
Mike A. Fetcenko
became Vice President Ovonic
Materials at ECD in April 2008. He joined ECD in 1980 and was
one of the founding members of Ovonic Battery Company (OBC)
where he served as Senior Vice President and Director of
Technology from 1992 until the time when OBC was integrated into
the Ovonic Materials Segment of ECD in 2008 as part of
ECDs restructuring. Mr. Fetcenko has also played a
pivotal role in the enforcement and licensing of the
companys intellectual property and was responsible for
technical and business-related interactions with OBCs
licensees. As the head of the Ovonic Materials Division,
Mr. Fetcenko leads the operations and strategic planning
and drives commercialization of our diverse ECD technologies
including biofuel reformation, fuel cell, hydrogen storage and
information technology while continuing to grow our Ovonic NiMH
battery business.
Subhendu Guha
is Senior Vice President,
Photovoltaic Technology of ECD and Chairman of its wholly owned
subsidiary, United Solar Ovonic. Dr. Guha joined ECD in
1982. He was named United Solar Ovonics President in 2000
and its President and Chief Operating Officer in May 2003, a
position he held from 2003 until 2007, when he became Senior
Vice President, Photovoltaic Technology of ECD. Dr. Guha is
a world-renowned authority in PV technology, with many
years of experience in the development and manufacture of solar
panels. He serves on many national and international PV
committees, including the Advisory Board of National Center for
Photovoltaics, the body responsible for directing and
implementing the U.S. Department of Energys strategy in
PV. He has a PhD in Electronics.
Jay B. Knoll
is Senior Vice President, General
Counsel, and Chief Administrative Officer of ECD. Prior to
joining the Company in 2006, Mr. Knoll was Vice President,
General Counsel and Corporate Secretary of Collins &
Aikman Corporation from November 2002 to September 2005.
Collins & Aikman filed for bankruptcy in May 2005. On
November 8, 2007, Mr. Knoll was advised by the staff
of the SEC that it is considering recommending that the SEC
bring a civil injunctive action against Mr. Knoll, alleging
violation of federal securities laws, including the anti-fraud
provisions, based on his actions regarding two March 2005 press
releases by Collins & Aikman. The press releases
related to an internal investigation and financial restatement
by Collins & Aikman. None of the allegations involve
ECD. ECD believes that Mr. Knoll had no prior knowledge of
the underlying accounting that was the subject of
Collins & Aikmans financial restatement, and ECD
continues to have confidence in Mr. Knolls integrity
and professional competence. The staff of the SEC, in accordance
with its customary practices, offered Mr. Knoll the
opportunity to make a submission setting forth why he believes
that such action should not be brought. Mr. Knoll made such
submission in December 2007. Mr. Knoll has held positions
at Lear Corporation, Covisint LLC, Visteon Corporation, and
Detroit Diesel Corporation. Mr. Knoll holds a B.A. degree
from the University of Michigan and has a J.D. degree from the
Wayne State University School of Law.
Sanjeev Kumar
is Vice President and Chief
Financial Officer of ECD. Mr. Kumar served as Chief
Financial Officer of Rutheford Chemicals LLC, a New Jersey-based
company owned by a private equity firm, from 2004 until June
2006 when he joined ECD. From 2002 to 2004, Mr. Kumar
co-founded Clean Fuel Generation, LLC, a California-based
company that performed research and development in emerging fuel
cell technology. Mr. Kumar also brings with him experience
from Rhodia, Inc., where he served as Vice President of Finance
and Chief Financial Officer, and from Occidental Petroleum
Corporation, where he served in a variety of positions from 1991
to 2000. Mr. Kumar holds a B.A. in Business Administration
and has an MBA from the University of Southern California.
Arthur A. Rogers
is Vice President of HR and
Administration of ECD. Mr. Rogers has more than thirty
years of experience in Human Resources and developing and
executing organizational strategy. He served as Vice President
of HR and Administration of United Solar Ovonic from December
2005 until May 2007, when he joined ECD. From 1998 until joining
ECD in 2005, Mr. Rogers served as Senior Vice President of
Human Resources for GKN Sinter Metals. Prior to that, he served
in various positions including as International Human Resources
Director for Hills Pet Nutrition in 1997 and Vice
President of Management Resourcing for Lucasvarity Corporation
from 1995 to 1997. Mr. Rogers holds a B.S. in
Labor & Industrial Relations with a concentration in
Management, Economics and Psychology from Michigan State
University.
Marcelino Susas
is Vice President of Strategic
Marketing of ECD. Prior to joining ECD in January 2008,
Mr. Susas served as Business Director of Lumber/Retail at
CertainTeed Corporation, a subsidiary of Saint-Gobain, from June
2007 to January 2008 and Director of Business Development
Insulation Group at CertainTeed Corporation from August 2005 to
May 2007. Before joining CertainTeed, Mr. Susas was a
manager at Carrier
S-29
from July 2003 to August 2005. From March 2002 to June 2003, he
was Manager of Business Development and Strategic Planning at
United Technologies Fuel Cells. Mr. Susas also did
consulting at McKinsey & Company from January 1999 to
March 2002, primarily working in their energy practice. He also
brings with him experience from Public Service
Electric & Gas where he served in various positions
from 1989 to 1999. Mr. Susas holds a B.S. in Electrical
Engineering from the New Jersey Institute of Technology and has
an MBA from New York Universitys Stern Graduate
School of Business.
Tom Toner
is Vice President Systems Engineering at
ECD. He most recently served as Senior Director of Operations
for Varian Semiconductor Equipment Assoc. from 2006 to 2007.
From 2001 to 2006, Mr. Toner worked at Applied Materials,
Inc., serving as Senior Director of System Engineering of the
Front End Products Group from 2001 to 2004, Managing Director of
Global Operations for the Front End Products Group from 2004 to
2006, and Managing Director of Global Operations, New Business
and New Products in 2006. From 1980 to 2001, he held various
leadership roles in both engineering and operations at United
Technologies Corporation. He has extensive experience in complex
product development and global operations. Mr. Toner holds
his M.S. in Engineering and Management from MIT and his B.S. in
Mechanical Engineering from the University of Virginia.
Corby C. Whitaker
has served as Vice President,
Global Sales of ECD since January 2008. From 2004 until 2008,
Mr. Whitaker served as Director of Sales with Johns
Manville Corporation. Before joining Johns Manville Corporation,
Mr. Whitaker served as Regional Vice President of Sales for
Tractebel Energy Services, Inc. (formerly AES NewEnergy, Inc.)
from 2002 to 2004. Mr. Whitaker holds a B.S.M.E. from Texas
A&M University.
Directors
of the Company
Joseph A. Avila
has served as an officer and
Executive Vice President of Strategic Operations and Process of
Quanta Services, Inc. since October 1, 2006. From 1978
until May 2006, he held various positions with
McKinsey & Company, a global management consulting
firm, most recently as a Director providing leadership to the
Energy and Technology Management Practices. In addition,
Mr. Avila serves on the Advisory Board of the Houston
Technology Center.
Christopher P. Belden
is, since March 2008, the
Senior Vice President - Global Manufacturing, at NXP
Semiconductors. From February 2005 to February 2007, he was
Group Vice President of Global Operations for Applied Materials,
Inc., a global leader in nanomanufacturing technology solutions
for the electronics industry, where he was responsible for
volume manufacturing, supply chain management, reliability,
quality and worldwide facilities. Prior to joining Applied
Materials, Mr. Belden had a 23 year career at Motorola
where his last role was Senior Vice President of Global
Manufacturing and Operations.
Robert I. Frey
is an Assistant Professor of Global
Management and Business Ethics and serves as the Director of the
Business Ethics Center at Seidman School of Business, Grand
Valley State University, in Grand Rapids, Michigan. He joined
Herman Miller, Inc. in 1996, where he was an Executive Vice
President and member of the Executive Committee and president of
Herman Miller International, accountable for international
strategic planning, manufacturing, sales and marketing until his
retirement in 2002. He also serves as Director and Treasurer for
Holland Chorale, a charitable organization.
William J. Ketelhut
was, from 2001 to 2002,
President of Control Products at Honeywell International, a
global company with fifteen major lines of businesses including
semiconductors, consumer products and sensors products. From
1994 to 2001, he served as president of several business units
of Invensys plc, a global automation, controls and process
solutions group. He was president and chief executive officer at
GE/Micro Switch Control Inc. (a joint venture between GE and
Honeywell Microswitch Division) from 1992 to 1994.
Mr. Ketelhut has also been involved in consulting and
private company board work. He received an MBA from the
University of Chicago with an emphasis on Finance and Marketing.
Florence I. Metz
held, until her retirement in
1996, various executive positions with Inland Steel, including
General Manager, New Ventures, Inland Steel Company (1989-1991);
General Manager, New Ventures, Inland Steel Industries
(1991-1992) and Advanced Graphite Technologies (1992-1993); and
Program Manager for Business and Strategic Planning at Inland
Steel (1993-1996).
S-30
Stephen Rabinowitz
currently serves as Chairman of
the Board. He was Chairman and Chief Executive Officer of
General Cable, Inc., a leader in the development, design,
manufacture, marketing and distribution of copper, aluminum and
fiber optic wire and cable products for the communications,
energy and specialty markets, until he retired in 2001. Prior to
joining General Cable as President and CEO in 1994, he served as
President and CEO of Allied Signal Braking Systems, and before
that as President and CEO of General Electrics Electrical
Distribution and Control business. He has also held management
positions in manufacturing operations and technology at the
General Electric Company and the Ford Motor Company.
Mr. Rabinowitz was appointed as a member of the Board of
Directors of Columbus McKinnon Corp. in October 2004 and serves
on its Audit and Compensation Committees, as well as chairing
its Compensation and Succession Committee. He is also a Director
of MicroHeat, Inc. and Chairman of its Audit Committee.
George A. Schreiber, Jr.
is President, CEO and
Director of SEMCO Energy, a natural gas distribution company
serving markets in Michigan and Alaska. From September 1999 to
March 2004, he was the Chairman, Global Energy Group, at Credit
Suisse First Boston, New York.
S-31
Description
of Common Stock
This section describes the general terms and provisions of our
common stock. The summary set forth below does not purport to be
complete and is subject to and qualified in its entirety by
reference to our amended and restated certificate of
incorporation and amended and restated bylaws, each of which is
incorporated by reference. We encourage you to read our amended
and restated certificate of incorporation and amended and
restated bylaws for additional information before you decide
whether to invest in this offering.
General
Our amended and restated certificate of incorporation authorizes
the issuance of up to 100,000,000 shares of common stock,
par value $0.01 per share.
Voting
Rights
Shares of common stock are entitled to one vote per share on all
matters to be voted on by our stockholders. Holders of shares of
our capital stock are not entitled to cumulate their votes in
the election of directors to our board of directors. Generally,
all matters to be voted on by stockholders must be approved by a
majority of the votes entitled to be cast at a meeting by all
shares of common stock present in person or represented by
proxy, voting together as a single class. Except as otherwise
provided by law, and subject to any voting rights granted to any
outstanding preferred stock, amendments to our amended and
restated certificate of incorporation generally must be approved
by at least a majority of the combined voting power of all our
common stock, voting together as a single class.
Dividend
Rights
The holders of outstanding shares of common stock are entitled
to receive dividends out of assets legally available at the
times and in the amounts that our board of directors may
determine from time to time.
No
Preemptive or Redemption Rights
Shares of our common stock are not entitled to preemptive rights
and are not subject to redemption or sinking fund provisions.
Right to
Receive Liquidation Distributions
Upon our liquidation, dissolution or
winding-up,
the holders of common stock are entitled to share equally in all
of our assets remaining after payment of all liabilities and the
liquidation preferences of any outstanding preferred stock.
Anti-Takeover
Effects of Certain Provisions of Delaware Law
We are subject to the provisions of Section 203 of the
DGCL, regulating corporate takeovers. In general, those
provisions prohibit a Delaware corporation from engaging in any
business combination with any interested stockholder for a
period of three years following the date that the stockholder
became an interested stockholder, unless:
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|
the transaction is approved by the board before the date the
interested stockholder attained that status;
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|
|
|
upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction
commenced; or
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|
on or after the date the business combination is approved by the
board and authorized at a meeting of stockholders, by at least
two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.
|
S-32
Section 203 defines business combination to
include the following:
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|
|
|
any merger or consolidation involving the corporation and the
interested stockholder;
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|
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|
any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested
stockholder;
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|
subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
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|
|
|
any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or
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|
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|
the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
|
In general, Section 203 defines an interested stockholder
as any entity or person beneficially owning 15% or more of the
outstanding voting stock of a corporation and any entity or
person affiliated with or controlling or controlled by any of
these entities or persons.
A Delaware corporation may opt out of this provision either with
an express provision in its original certificate of
incorporation or in an amendment to its certificate of
incorporation or bylaws approved by its stockholders. However,
we have not opted out, and do not currently intend to opt out,
of this provision. The statute could prohibit or delay mergers
or other takeover or change in control attempts and,
accordingly, may discourage attempts to acquire us.
Anti-Takeover
Effects of Our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws
Certain provisions of our amended and restated certificate of
incorporation and amended and restated bylaws, which are
summarized in the following paragraphs, may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by
stockholders:
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No Stockholder Action by Written Consent; Calling of Special
Meetings of Stockholders.
Our amended and
restated bylaws do not permit stockholder action by written
consent. Our amended and restated bylaws also provide that
special meetings of our stockholders may be called only by the
board of directors.
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Advance Notice Requirements for Stockholder Proposals and
Director Nominations.
Our amended and restated
bylaws provide that stockholders seeking to nominate candidates
for election as directors or to bring business before an annual
meeting of stockholders must provide timely notice of their
proposal in writing to the corporate secretary. Generally, to be
timely, a stockholders notice must be received at our
principal executive offices not less than 90 days nor more
than 120 days prior to the first anniversary date of the
previous years annual meeting. Our amended and restated
bylaws also specify requirements as to the form and content of a
stockholders notice. These provisions may impede
stockholders ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
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Vacancies.
Our amended and restated
certificate of incorporation and amended and restated bylaws
provide that any vacancies on our board of directors will be
filled only by the affirmative vote of a majority of the
remaining directors, although less than a quorum.
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Limitation
of Liability and Indemnification Matters
We have adopted provisions in our amended and restated
certificate of incorporation that limit the liability of our
directors for monetary damages for breach of their fiduciary
duty as directors, except for liability that cannot be
S-33
eliminated under the DGCL. Delaware law provides that directors
of a company will not be personally liable for monetary damages
for breach of their fiduciary duty as directors, except for
liabilities:
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for any breach of their duty of loyalty to us or our
stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
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for unlawful payment of dividend or unlawful stock repurchase or
redemption, as provided under Section 174 of the
DGCL; or
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for any transaction from which the director derived an improper
personal benefit.
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Our amended and restated certificate of incorporation and
amended and restated bylaws also provide that we will indemnify
our directors and officers to the fullest extent permitted by
Delaware law. Our amended and restated bylaws also permit us to
purchase insurance on behalf of any officer, director, employee
or other agent for any liability arising out of his actions as
our officer, director, employee or agent, regardless of whether
the amended and restated bylaws would permit indemnification. We
have entered into separate indemnification agreements with our
directors and executive officers that could require us, among
other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as directors and
to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
Nasdaq
Global Select Market Listing Symbol
Our common stock trades on the Nasdaq Global Select Market under
the symbol ENER.
Registered
Agent
The registered agent for our common stock is the Prentice-Hall
Corporation System, Inc.
S-34
Description
of the Share Lending Agreement and Concurrent Offering of
Convertible Notes
Concurrently with this offering of common stock, we are
offering, by means of a separate prospectus supplement and
accompanying prospectus, $225,000,000 aggregate principal amount
of the convertible senior notes. The underwriters also have a
30-day
option to purchase up to an additional $33,750,000 of
convertible senior notes. We intend to use the net proceeds from
the offering of convertible notes for expansion of our
production capacity in connection with the 1 GW plan and for
general corporate purposes.
To make the purchase of the notes more attractive to prospective
investors, we have entered into a share lending agreement, dated
June , 2008, with Credit Suisse Securities
(USA) LLC, as agent for its affiliate, Credit Suisse
International, which we refer to as CSI, as principal, under
which we have agreed to loan to CSI 3,438,500 shares of our
common stock for a period beginning on the date we entered into
the share lending agreement and ending on June 15, 2013, or, if
earlier, the date as of which we have notified CSI in writing of
our intention to terminate the agreement at any time after the
entire principal amount of the notes ceases to be outstanding,
or earlier in certain circumstances, which period we refer to as
the loan availability period.
CSI will receive all of the proceeds from the sale of the
borrowed shares pursuant to the share lending agreement, and we
will receive only a nominal lending fee of $0.01 per share for
each share of common stock that we loan pursuant to the share
lending agreement.
Share loans under the share lending agreement will terminate and
the borrowed shares must be returned to us upon the termination
of the loan availability period, as well as under the following
circumstances:
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CSI may terminate all or any portion of a loan at any time;
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we may terminate any or all of the outstanding loans upon a
default by CSI under the share lending agreement, including a
breach by CSI of any of its representations and warranties,
covenants or agreements under the share lending agreement, or
the bankruptcy of CSI; or if we enter into a merger or similar
business combination transaction with an unaffiliated third
party (as defined in the agreement) pursuant to which the shares
are converted into or exchanged for cash, securities or other
property, all outstanding loans will terminate on the effective
date of such event.
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Any shares that we loan to CSI will be issued and outstanding
for corporate law purposes and, accordingly, the holders of the
borrowed shares will have all of the rights of a holder of our
outstanding shares, including the right to vote the shares on
all matters submitted to a vote of our stockholders and the
right to receive any dividends or other distributions that we
may pay or make on our outstanding shares of common stock.
However, under the share lending agreement, CSI has agreed:
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to pay to us an amount equal to any cash dividends that we pay
on the borrowed shares, and
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to pay or deliver to us any other distribution, in liquidation
or otherwise, that we make on the borrowed shares.
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CSI also has agreed that it will not vote any borrowed shares of
which it is the record owner, and it will not transfer or
dispose of any borrowed shares except pursuant to a registration
statement that is effective under the Securities Act. However,
investors that purchase the shares from CSI (and any subsequent
transferees of such purchasers) will be entitled to the same
voting, dividend or other rights with respect to those shares as
any other holder of our common stock.
Under the share lending agreement, if CSI receives a rating
downgrade of its long term, unsecured and subordinated
indebtedness below a specified level by Standard &
Poors Ratings Group or Moodys Investor Services,
Inc., CSI has agreed to post and maintain with Credit Suisse
Securities (USA) LLC, acting as collateral agent on our behalf,
collateral in the form of cash, government securities,
certificates of deposit, high-grade commercial paper of
U.S. issuers or money market shares with a market value at
least equal to 100% of the market value of the borrowed shares
as security for the obligation of CSI to return the borrowed
shares of common stock to us when required under the terms of
the share lending agreement. In certain limited circumstances,
primarily if CSI is prohibited by law or court order from
returning the borrowed shares, we may elect to receive a
distribution of the posted collateral in lieu of the delivery of
the shares.
S-35
Our issuance of borrowed shares of our common stock offered
pursuant to the share lending agreement will be essentially
analogous to a sale of shares coupled with a prepaid forward
purchase contract for the reacquisition of the shares at a
future date. An instrument that requires physical settlement by
repurchase of a fixed number of shares in exchange for cash is
considered a forward purchase instrument. While the share
lending agreement does not require a cash payment upon return of
the shares, physical settlement is required (
i.e.
the
borrowed shares must be returned at the end of the arrangement).
In view of this and the contractual undertakings of CSI in the
share lending agreement, which have the effect of substantially
eliminating the economic dilution that otherwise would result
from the issuance of the borrowed shares, we believe that under
U.S. GAAP, the borrowed shares will not be considered
outstanding for the purpose of computing and reporting our
earnings per share. Notwithstanding the foregoing, the shares
nonetheless will be issued and outstanding and will be eligible
for trading on the Nasdaq Global Select Market.
CSI has agreed that it, or its affiliates, will use the borrowed
shares to facilitate privately negotiated transactions or short
sales by which investors hedge their investment in the notes
being offered concurrently, and, with our consent, other
securities that we may issue in the future. CSI, or its
affiliates, is initially offering for sale, pursuant to this
prospectus supplement, 3,438,500 of the borrowed shares they are
entitled to borrow under the share lending agreement, and it
expects to sell the remaining borrowed shares pursuant to this
prospectus supplement on a delayed basis in various transactions
at any time and from time to time in amounts to be determined by
it. We refer to these borrowed shares as supplemental
hedge shares. In connection with the sale of these
supplemental hedge shares, CSI, or its affiliates, may effect
such transactions by selling the supplemental hedge shares to or
through dealers, and these dealers may receive compensation in
the form of discounts, concessions or commissions from
purchasers of shares for whom the dealers may act as agents or
to whom they may sell as principals. Over the same period that
CSI, or its affiliates, sells these supplemental hedge shares,
it may, in its discretion, purchase a number of shares of our
common stock at least equal to the number of the supplemental
hedge shares it is selling on the open market to facilitate
hedging transactions by investors in the notes and
counterparties to the capped call transactions.
The existence of the share lending agreements and the short
positions established in connection with the sale of the notes
and potentially certain of our other securities could have the
effect of causing the market price of our common stock to be
lower over the term of the share lending agreement than it would
have been had we not entered into the agreement. See Risk
Factors Risks Relating to our Common
Stock The effect of the issuance of our shares of
common stock in this offering pursuant to the share lending
agreement, which issuance is being made to facilitate sales of
our common stock in short sale transactions by purchasers of
certain of our securities, may be to lower the market price of
our common stock. However, we have determined that the
entry into the share lending agreement is in our best interests
as they are a means to facilitate the offer and sale of the
notes on terms more favorable to us than we could have otherwise
obtained.
S-36
Material
United States Tax Considerations for
Non-United
States Holders
The following is a summary of the material U.S. federal
income tax consequences of the purchase, ownership and
disposition of our common stock. Except where noted, this
summary deals only with common stock held as a capital asset. It
does not describe all of the tax consequences that may be
relevant to a holder in light of its particular circumstances or
to a holder subject to special rules, such as:
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a dealer in securities or currencies;
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a financial institution;
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a regulated investment company;
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a real estate investment trust;
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a tax-exempt organization;
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an insurance company;
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a cooperative;
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a person holding the notes as part of a hedging, integrated,
conversion or constructive sale transaction or straddle;
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a trader in securities that has elected the mark-to-market
method of accounting;
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a person who acquired common stock pursuant to the exercise of
any employee stock option or otherwise as compensation;
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a person liable for alternative minimum tax;
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a person who owns or has owned 5% or more of our common
stock; or
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a person who is an investor in a pass-through entity such as a
partnership.
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This summary is based on the provisions of the Internal Revenue
Code of 1986, as amended (the Code), final,
temporary, and proposed Treasury Regulations, administrative
pronouncements of the Internal Revenue Service (IRS)
and judicial decisions, all as of the date hereof. Those
authorities may be changed, possibly retroactively, so as to
result in U.S. federal income tax consequences different
from those summarized herein. Persons considering the purchase
of notes should consult their tax advisors with respect to the
application of the United States federal income tax laws to
their particular situations as well as any tax consequences
arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term
Non-U.S. Holder
means a beneficial owner of our common stock that is, for United
States federal income tax purposes:
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an individual who is classified as a nonresident alien for
United States federal income tax purposes;
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a foreign corporation; or
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a foreign estate or trust.
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Non-U.S. Holder
does not include a holder who is an individual present in the
United States for 183 days or more in the taxable year of
the disposition of the common stock and who is not otherwise a
resident of the United States for United States federal income
tax purposes. Such a holder should consult his or her own tax
advisor regarding the United States federal income tax
consequences of the sale, exchange or other disposition of the
common stock.
WE URGE PROSPECTIVE
NON-U.S. INVESTORS
TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
U.S. FEDERAL, STATE, LOCAL AND
NON-U.S. INCOME
AND OTHER TAX CONSIDERATIONS WITH RESPECT TO ACQUIRING, HOLDING
AND DISPOSING OF SHARES OF OUR COMMON STOCK.
S-37
Taxation
of Dividends on Common Stock
Dividends on our common stock paid to a
Non-U.S. Holder
generally will be subject to United States withholding tax at a
30% rate, subject to reduction under an applicable treaty. In
order to obtain a reduced rate of withholding, a
Non-U.S. Holder
will be required to provide a properly executed IRS
Form W-8BEN
certifying its entitlement to benefits under a treaty. A
Non-U.S. Holder
who is subject to withholding tax under such circumstances
should consult its tax advisor as to whether it can obtain a
refund for all or a portion of the withholding tax.
If a
Non-U.S. Holder
of our common stock is engaged in a trade or business in the
United States, and if the dividends are effectively connected
with the conduct of this trade or business, the
Non-U.S. Holder,
although exempt from United States withholding tax, will
generally have to include such dividend in income as ordinary
income when received and the
Non-U.S. Holder
will be required to provide a properly executed IRS
Form W-8ECI
in order to claim an exemption from withholding tax. These
Non-U.S. Holders
should consult their own tax advisors with respect to other
United States tax consequences of the ownership of our common
stock, including the possible imposition of a branch profits tax
at a rate of 30% (or at a reduced rate under an applicable tax
treaty) for corporate
Non-U.S. Holders.
Sale,
Exchange or Other Disposition of Our Common Stock
Subject to the discussion below concerning backup withholding, a
Non-U.S. Holder
generally will not be subject to United States federal income
tax on gain realized on a sale, exchange or other taxable
disposition of our common stock unless:
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the gain is effectively connected with a trade or business of
the
Non-U.S. Holder
in the United States; or
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we are or have been within the shorter of the five-year period
preceding such sale, exchange, or other disposition and the
period during which the
Non-U.S. Holder
held our common stock, a United States real property holding
corporation, as defined in the Code, and either (i) our common
stock is no longer listed on the NASDAQ Global Select Market or
another established securities market or (ii) the Non-U.S.
Holder has owned 5% or more of our common stock during such
period.
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We believe that we are not, and do not anticipate becoming, a
United States real property holding corporation.
Backup
Withholding and Information Reporting
Information returns will be filed with the IRS in connection
with payments on our common stock. Unless the
Non-U.S. Holder
complies with certification procedures to establish that it is
not a United States person, information returns may be filed
with the IRS in connection with the proceeds from a sale or
other disposition of the common stock and the
Non-U.S. Holder
may be subject to United States backup withholding on
distributions paid on our common stock or on the proceeds from a
sale or other disposition of our common stock. The certification
procedures generally require the
Non-U.S. Holder
to certify on IRS
Form W-8BEN,
under penalties of perjury, that it is not a United States
person. The amount of any backup withholding from a payment to a
Non-U.S. Holder
will be allowed as a credit against the
Non-U.S. Holders
United States federal income tax liability and may entitle the
Non-U.S. Holder
to a refund, provided that the required information is furnished
to the IRS.
S-38
Underwriting Underwritten
Shares
Under the terms and subject to the conditions contained in an
underwriting agreement to be filed as an exhibit relating to
this prospectus supplement, we have agreed to sell to the
underwriters named below, for whom Credit Suisse Securities
(USA) LLC and UBS Securities LLC are acting as joint
book-running managers and representatives, and the underwriters
have severally agreed to purchase the following respective
numbers of shares of common stock:
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Number of
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Underwriter
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Shares
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Credit Suisse Securities (USA) LLC
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UBS Securities LLC
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J.P. Morgan Securities Inc.
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Deutsche Bank Securities Inc.
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Lazard Capital Markets LLC
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Total
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1,270,000
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The underwriting agreement provides that the underwriters are
obligated to purchase all the underwritten shares if any are
purchased, other than those shares covered by the
over-allotment
option described below. The underwriting agreement also provides
that if an underwriter defaults on its purchase obligation, the
purchase commitments of the non-defaulting underwriters may be
increased or the underwritten equity offering may be terminated.
We have granted to the underwriters a
30-day
over-allotment
option to purchase on a pro rata basis up to an aggregate of
190,500 additional shares from us at the public offering price
less the underwriting discounts and commissions. The
overallotment option may be exercised if the underwriters sell
more than 1,270,000 shares in connection with the
underwritten equity offering.
The underwriters propose to offer the shares of common stock
initially at the public offering price set forth on the cover
page of this prospectus supplement and to selling group members
at that price less a selling concession of
$ per share. The underwriters and
selling group members may allow a discount of
$ per share on sales to other
broker/dealers. After the public offering, the representatives
may change the public offering price and concession and discount
to broker/dealers.
Commissions
and Expenses
The following table summarizes the compensation and estimated
expenses we will pay:
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Per Share
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Total
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Without
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With
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Without
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With
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Over-allotment
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Over-allotment
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Over-allotment
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Over-allotment
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Option
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Option
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Option
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Option
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Underwriting discounts and commissions
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$
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$
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$
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$
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Expenses payable by us
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$
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$
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$
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$
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The expenses of this offering and the concurrent offering of our
convertible notes that are payable by us are estimated to be
$800,000 (excluding underwriting discounts and commissions).
Lock-Up
Agreements
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the SEC a registration statement under the Securities Act
relating to, any shares of our common stock regardless of class
(the Securities), or securities convertible into or
exchangeable or exercisable for any shares of our Securities, or
publicly disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent of
Credit Suisse Securities (USA) LLC and UBS Securities LLC for a
period of 90 days after the date of this prospectus
supplement, subject to certain exceptions, including grants of
S-39
equity awards pursuant to terms of an equity award plan in
effect on the date hereof, issuances pursuant to the exercise of
employee stock options outstanding on the date hereof and the
issuance of the underwritten shares, the borrowed shares and the
convertible notes.
Our officers and directors have agreed that, subject to certain
exceptions (including an exception for certain tax-driven sales
by our executive officers), they will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly,
any Securities, or securities convertible into or exchangeable
or exercisable for Securities, enter into a transaction that
would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of the common stock,
whether any of these transactions are to be settled by delivery
of the Securities or other securities, in cash or otherwise, or
publicly disclose the intention to make any offer, sale, pledge
or disposition, or to enter into any transaction, swap, hedge or
other arrangement, without, in each case, the prior written
consent of Credit Suisse Securities (USA) LLC and UBS Securities
LLC for a period of 90 days after the date of this
prospectus supplement except for issuances pursuant to the
exercise of employee stock options outstanding on the date
hereof and for securities acquired in the open market and
transfers to family members or certain other parties or as a
gift.
Notwithstanding the foregoing, if (1) during the last
17 days of the
lock-up
period, we issue an earnings release or material news of a
material event relating to us occurs or (2) prior to the
expiration of the
lock-up
period, we announce that we will release earnings results during
the
16-day
period beginning on the last day of the
lock-up
period, then the
lock-up
period shall continue until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
announcement of the material news of the occurrence of the
material event, unless Credit Suisse Securities (USA) LLC and
UBS Securities LLC waive such extension in writing.
Credit Suisse Securities (USA) LLC and UBS Securities LLC have
also agreed to permit our directors and executive officers who
entered into
lock-up
agreements with the underwriters to (i) sell or trade any
such securities during the
lock-up
period in accordance with the directors and officers
existing
Rule 10b5-1
trading plans and (ii) enter into any new, or renew or
amend any existing,
Rule 10b5-1
trading plan, provided that in connection with the entry,
renewal or amendment of such plan no securities shall be
scheduled for sale thereunder during the
lock-up
period. Under these
Rule 10b5-1
trading plans, these individuals have contracted or will
contract with brokers to buy or sell our common stock on a
periodic basis. Under these plans, a broker executes trades
pursuant to the parameters established by the executive officer
or director at the time of the creation of the plan, without
further direction from them.
Indemnification
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to any payments that the underwriters may be
required to make for these liabilities.
Stabilization,
Short Positions and Penalty Bids
The representatives may engage in stabilizing transactions,
short sales and purchases to cover positions created by short
sales, and penalty bids or purchases, or passive market making
for the purpose of pegging, fixing or maintaining the price of
our common stock, in accordance with Regulation M under the
Exchange Act:
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum.
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A short position involves a sale by the underwriters of common
stock in excess of the number of shares of common stock the
underwriters are obligated to purchase in the offering, which
creates the syndicate short position. This short position may be
either a covered short position or a naked short position. In a
covered short position, the number of shares of common stock
involved in the sales made by the underwriters in excess of the
number of shares of common stock they are obligated to purchase
is not greater than the number of shares of common stock that
they may purchase by exercising their option to purchase
additional shares of common stock. In a naked short position,
the number of shares involved is greater than the principal
number of shares in their option to purchase additional shares.
The underwriters may close out any short position by either
exercising their option to purchase additional shares
and/or
purchasing shares in the open market. In
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S-40
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determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares of
common stock through their option to purchase additional shares
of common stock. A naked short position is more likely to be
created if the underwriters are concerned that there could be
downward pressure on the price of the shares of common stock in
the open market after pricing that could adversely affect
investors who purchase in the offering.
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Syndicate covering transactions involve purchases of shares of
common stock in the open market after the distribution has been
completed in order to cover syndicate short positions.
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Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the shares of common
stock originally sold by the syndicate member are purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
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Passive market making consists of displaying bids on the Nasdaq
Global Select Market no higher than the bid prices of
independent market makers and making purchases at prices no
higher than those independent bids and effected in response to
order flow. Net purchases by a passive market maker on each day
are limited to a specified percentage of the passive market
makers average daily trading volume in our common stock
during a specified period and must be discontinued when such
limit is reached. Passive market making may cause the price of
common stock to be higher than the price that otherwise would
exist in the open market in the absence of such transactions.
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These stabilizing transactions, syndicate covering transactions
and penalty bids may have the effect of raising or maintaining
the market price of our shares of common stock or preventing or
retarding a decline in the market price of the shares of common
stock. As a result, the price of the shares of common stock may
be higher than the price that might otherwise exist in the open
market. These transactions may be effected on the Nasdaq Global
Select Market or otherwise and, if commenced, may be
discontinued at any time.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
the shares of common stock. In addition, neither we nor any of
the underwriters make any representation that the
representatives will engage in these stabilizing transactions or
that any transaction, once commenced, will not be discontinued
without notice.
Nasdaq
Global Select Market
Our shares of common stock are listed on the Nasdaq Global
Select Market under the symbol ENER.
We cannot assure you that prices at which our shares sell in the
public market after the underwritten equity offering will not be
lower than the offering price.
Electronic
Distribution
A prospectus in electronic format may be made available on
websites or through other online services maintained by one or
more of the underwriters
and/or
selling group members participating in the underwritten equity
offering, or by their affiliates. In those cases, prospective
investors may view offering terms online and, depending upon the
particular underwriter or selling group member, prospective
investors may be allowed to place orders online. The
underwriters may agree with us to allocate a specific number of
shares for sale to online brokerage account holders. Any such
allocation for online distributions will be made by the
representatives on the same basis as other allocations.
Other than this prospectus supplement and the accompanying
prospectus in electronic format, the information on any
underwriters or selling group members website and
any information contained in any other web site maintained by an
underwriter or selling group member is not part of this
prospectus supplement and the accompanying prospectus or the
registration statement of which this prospectus supplement and
the accompanying prospectus forms a part, has not been approved
and/or
endorsed by us or any underwriter or selling group.
S-41
Stamp
Taxes
If you purchase shares of common stock offered in this
prospectus supplement and the accompanying prospectus, you may
be required to pay stamp taxes and other charges under the laws
and practices of the country of purchase, in addition to the
underwritten shares price listed on the cover page of this
prospectus supplement. Accordingly, we urge you to consult a tax
advisor with respect to whether you may be required to pay taxes
or charges, as well as any other consequences that may arise
under the laws of the country of purchase.
Relationships
Several of the underwriters have in the past performed
investment banking services for us. Concurrently with this
offering, we are offering, by means of a separate prospectus
supplement and accompanying prospectus, $225.0 million
principal amount of convertible notes through the underwriters
of the underwritten equity offering. In addition, we have agreed
to loan to Credit Suisse International, an affiliate of Credit
Suisse Securities (USA) LLC, pursuant to a share lending
agreement described in Description of the Share Lending
Agreement and Concurrent Offering of Convertible Notes
3,438,500 shares of our common stock. CSI has agreed that
it, or its affiliates, will use the short sale of our common
stock pursuant to that offering to facilitate transactions by
which investors in the notes and, with our consent, other
securities we may offer in the future, will hedge their
respective investments. See Description of the Share
Lending Agreement and Concurrent Offering of Convertible
Notes. In connection with facilitating those transactions,
the borrower and its affiliates expect to receive customary,
negotiated fees from investors.
The underwriters may in the future perform investment banking
and advisory services for us from time to time for which they
may receive customary fees and expenses. The underwriters may,
from time to time, engage in transactions with or perform other
services for us in the ordinary course of their business.
Lazard Frères & Co. LLC referred this transaction to
Lazard Capital Markets LLC and will receive a referral fee from
Lazard Capital Markets LLC in connection therewith.
S-42
Underwriting Borrowed
Shares
3,438,500 shares of our common stock offered by this
prospectus supplement and the accompanying prospectus are shares
that we have agreed to loan to Credit Suisse International, or
CSI, an affiliate of Credit Suisse Securities (USA) LLC, which
is acting as a managing underwriter in this offering, pursuant
to the share lending agreement.
The borrowed shares of our common stock may be offered for sale
in transactions, including block sales, in the over-the-counter
market, in negotiated transactions or
otherwise. of
these borrowed shares will be initially offered at
$ per share and the remaining
borrowed shares will subsequently be sold at prevailing market
prices at the time of sale or at negotiated prices.
CSI, or its affiliates, will receive the proceeds from the sale
of the borrowed shares and CSI, or its affiliates, has agreed to
use those shares to facilitate privately negotiated transactions
or short sales by which investors hedge their investments in our
convertible notes, which are being offered in a concurrent
registered offering, and certain other of our securities. See
Description of the Share Lending Agreement and Concurrent
Offering of Convertible Notes. Credit Suisse Securities
(USA) LLC has determined the offering price
of of
the borrowed shares of common stock initially offered pursuant
to this prospectus supplement and the accompanying prospectus by
initially soliciting indications of interest from potential
purchasers of our common stock and conducting customary
negotiations with those potential purchasers during the offering
period. The price at which investors in our convertible notes
establish their hedge positions through CSI or its affiliates
will be the offering price of the borrowed shares of our common
stock offered hereby. As a result, during the offering period,
while Credit Suisse Securities (USA) LLC negotiated a purchase
price with purchasers of our common stock, Credit Suisse
Securities (USA) LLC has solicited indications of interest,
based on the purchase price negotiated with those potential
purchasers, from convertible notes investors seeking to
establish a hedge position. Credit Suisse Securities (USA) LLC
has established a clearing price for a number of
borrowed shares at which both purchasers of our common stock
were willing to purchase borrowed shares offered hereby and
investors in our convertible notes were willing to establish
hedge positions. The clearing price is the offering price
hereunder, and may be at a discount to the market price of our
common stock at the time the offering is commenced.
In addition, in connection with facilitating such transactions,
CSI or its affiliates expect to receive customary negotiated
fees from investors in our convertible notes, which may be
deemed to be underwriters compensation. CSI and its
affiliates may engage in such transactions at any time and from
time to time during the term of the share lending agreement in
share amounts to be determined by CSI and such affiliates.
CSI has advised us that they expect to offer up to
approximately of
additional borrowed shares on a delayed basis from time to time.
We refer to these shares as supplemental hedge
shares in this prospectus supplement. Following the
initial sale of borrowed shares pursuant to this offering, CSI,
or its affiliates, will sell, from time to time, the
supplemental hedge shares in transactions, including block
sales, on the Nasdaq Global Select Market, in the
over-the-counter market, in negotiated transactions or
otherwise. These supplemental hedge shares will be sold at
market prices prevailing at the time of sale or at negotiated
prices. In connection with the sale of these supplemental hedge
shares, CSI, or its affiliates, may effect such transactions by
selling the shares to or through dealers, and these dealers may
receive compensation in the form of discounts, concessions or
commissions from the forward counterparties and/or from
purchasers of shares for whom the dealers may act as agents or
to whom they may sell as principals. Over the same period that
CSI, or its affiliates, sells these supplemental hedge shares,
CSI may, in its discretion, purchase a number of shares on the
open market at least equal to the number of the supplemental
hedge shares it is selling to facilitate hedging transactions by
investors in the convertible notes. See Description of the
Share Lending Agreement and Concurrent Offering of Convertible
Notes above.
We will not receive any proceeds from the sale of borrowed
shares of our common stock pursuant to this prospectus
supplement and accompanying prospectus, but we will receive a
nominal lending fee for their use from CSI.
S-43
Commissions
and Expenses
The following table summarizes the underwriting discounts and
commission we will pay to the underwriter.
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Paid by ECD
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Per share
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$
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Total
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$
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Under the share lending agreement, we will receive a nominal fee
of $0.01 per share from CSI. The expenses of this offering and
the concurrent offering of our convertible notes that are
payable by us are estimated to be $800,000 (excluding
underwriting discounts and commissions).
Indemnification
We have agreed to indemnify the underwriter against certain
liabilities, including liabilities under the Securities Act, or
to contribute to any payments that the underwriter may be
required to make for these liabilities.
Stabilization
and Short Positions
In order to facilitate the offering of the common stock, the
underwriter may engage in transactions that stabilize, maintain
or otherwise affect the price of the common stock. These
transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Short
sales involve the sale by the underwriter of a greater number of
borrowed shares than it is required to purchase in this
offering. The underwriter must close out any short position by
purchasing shares in the open market. A short position is more
likely to be created if the underwriter is concerned that there
may be a downward pressure on the price of the shares in the
open market after pricing that could aversely affect investors
who purchase in the offering. Stabilizing transactions consist
of certain bids for or purchases of the shares made by the
underwriter in the open market prior to the completion of the
offering. Any of these activities may stabilize or maintain the
market price of the shares above independent market levels. The
underwriter is not required to engage in these activities and
may end any of these activities at any time.
Relationships
The underwriter has in the past performed investment banking
services for us. Additionally, Credit Suisse Securities (USA)
LLC, is also acting as one of the underwriters in our concurrent
offering of convertible notes and the offering of the
underwritten shares, for which it will receive customary fees.
The underwriter may in the future perform investment banking and
advisory services for us from time to time for which it may
receive customary fees and expenses. The underwriter may, from
time to time, engage in transactions with or perform other
services for us in the ordinary course of its business.
NASD
Conduct Rules
Because CSI, an affiliate of Credit Suisse Securities (USA) LLC,
is receiving all of the proceeds of this offering, this offering
is being conducted in accordance with Rule 2710(h) of the
National Association of Securities Dealers, or NASD. Because a
bona fide independent market exists for our common stock, the
NASD does not require that we use a qualified independent
underwriter for this offering.
S-44
Notice to
Canadian Residents
Resale
Restrictions
The distribution of the common stock in Canada is being made
only on a private placement basis exempt from the requirement
that we prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the
common stock are made. Any resale of the common stock in Canada
must be made under applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require
resales to be made under available statutory exemptions or under
a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek
legal advice prior to any resale of the common stock.
Representations
of Purchasers
By purchasing the common stock in Canada and accepting a
purchase confirmation a purchaser is representing to us and the
dealer from whom the purchase confirmation is received that:
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the purchaser is entitled under applicable provincial securities
laws to purchase the common stock without the benefit of a
prospectus qualified under those securities laws;
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where required by law, that the purchaser is purchasing as
principal and not as agent;
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the purchaser has reviewed the text above under Resale
Restrictions; and
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the purchaser acknowledges and consents to the provision of
specified information concerning its purchase of the common
stock to the regulatory authority that by law is entitled to
collect the information.
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Further details concerning the legal authority for this
information is available on request.
Rights of
ActionOntario Purchasers Only
Under Ontario securities legislation, certain purchasers who
purchase a security offered by this prospectus during the period
of distribution will have a statutory right of action for
damages, or while still the owner of the common stock, for
rescission against us in the event that this prospectus contains
a misrepresentation without regard to whether the purchaser
relied on the misrepresentation. The right of action for damages
is exercisable not later than the earlier of 180 days from
the date the purchaser first had knowledge of the facts giving
rise to the cause of action and three years from the date on
which payment is made for the common stock. The right of action
for rescission is exercisable not later than 180 days from
the date on which payment is made for the common stock. If a
purchaser elects to exercise the right of action for rescission,
the purchaser will have no right of action for damages against
us. In no case will the amount recoverable in any action exceed
the price at which the common stock were offered to the
purchaser and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, we will have
no liability. In the case of an action for damages, we will not
be liable for all or any portion of the damages that are proven
to not represent the depreciation in value of the common stock
as a result of the misrepresentation relied upon. These rights
are in addition to, and without derogation from, any other
rights or remedies available at law to an Ontario purchaser. The
foregoing is a summary of the rights available to an Ontario
purchaser. Ontario purchasers should refer to the complete text
of the relevant statutory provisions.
Enforcement
of Legal Rights
All of our directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may
not be possible for Canadian purchasers to effect service of
process within Canada upon us or those persons. All or a
substantial portion of our assets and the assets of those
persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against us or those
persons in Canada or to enforce a judgment obtained in Canadian
courts against us or those persons outside of Canada.
Taxation
and Eligibility for Investment
Canadian purchasers of the common stock should consult their own
legal and tax advisors with respect to the tax consequences of
an investment in the common stock in their particular
circumstances and about the eligibility of the common stock for
investment by the purchaser under relevant Canadian legislation.
S-45
Legal
Matters
The validity of the shares of common stock in this offering will
be passed upon for us by Covington & Burling LLP,
Washington, D.C. Selected legal matters with respect to the
shares of common stock will be passed upon for the underwriters
by Skadden, Arps, Slate, Meagher & Flom LLP, Chicago,
Illinois.
Experts
Our consolidated financial statements appearing in our Annual
Report on
Form 10-K
for the year ended June 30, 2007 (including the schedule
appearing therein), have been audited by Grant Thornton LLP,
independent registered public accountants, as set forth in their
reports thereon included therein, and incorporated herein by
reference. Such financial statements and schedule are
incorporated herein in reliance upon the reports of Grant
Thornton LLP pertaining to such financial statements (to the
extent covered by consents filed with the Securities and
Exchange Commission) given on the authority of such firm as
experts in accounting and auditing.
Where You
Can Find More Information
Available
Information
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any of
this information at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
(800) SEC-0330
for further information on the public reference room. The SEC
also maintains an Internet website that contains reports, proxy
statements and other information regarding issuers, including
us, who file electronically with the SEC. The address of that
website is
www.sec.gov
. The information contained on the
SECs website is expressly not incorporated by reference
into this prospectus supplement.
Our SEC filings are also available on our website at
www.ovonic.com
, although the information on our website
is expressly not incorporated by reference into, and does not
constitute a part of, this prospectus supplement.
This prospectus supplement contains summaries of provisions
contained in some of the documents discussed in this prospectus
supplement, but reference is made to the actual documents for
complete information. All of the summaries are qualified in
their entirety by the actual documents. Copies of some of the
documents referred to in this prospectus supplement have been
filed or will be filed or incorporated by reference as exhibits
to the registration statement of which this prospectus
supplement is a part. If any contract, agreement or other
document is filed or incorporated by reference as an exhibit to
the registration statement, you should read the exhibit for a
more complete understanding of the document or matter involved.
Incorporation
of Documents by Reference
The SEC allows us to incorporate by reference information into
this prospectus supplement. This means we can disclose
information to you by referring you to another document we filed
with the SEC. We will make those documents available to you
without charge upon your oral or written request. Requests for
those documents should be directed to Energy Conversion Devices,
Inc., 2956 Waterview Drive, Rochester Hills, Michigan
48309, Attention: Corporate Secretary. In addition, you may
obtain copies of this information by calling us at
(248) 293-0440
or sending us an
e-mail
at
investor.relations@ovonic.com. This prospectus supplement
incorporates by reference the following documents:
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our annual report on
Form 10-K
for the fiscal year ended June 30, 2007;
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our quarterly reports on
Form 10-Q
for the quarters ended September 30, 2007,
December 31, 2007 and March 31, 2008;
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our current reports on
Form 8-K
filed on August 31, 2007, October 17, 2007,
January 10, 2008, February 11, 2008 (with the
exception of the information furnished in response to
Items 2.02 and 9.01 of that
Form 8-K),
February 19, 2008 and April 11, 2008; and
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S-46
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the description of the common stock included in the
Form 8-A
filed on November 27, 1968, and any amendment or report we
may file with the SEC for the purpose of updating such
description.
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We are also incorporating by reference additional documents we
may file pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus supplement
until the offering of the particular securities covered by this
prospectus supplement has been completed, other than any portion
of the respective filings furnished, rather than filed, under
the applicable SEC rules. This additional information is a part
of this prospectus supplement from the date of filing of those
documents.
Any statements made in this prospectus supplement or in a
document incorporated or deemed to be incorporated by reference
into this prospectus supplement will be deemed to be modified or
superseded for purposes of this prospectus supplement to the
extent that a statement contained in this prospectus supplement
or in any other subsequently filed document which is also
incorporated or deemed to be incorporated into this prospectus
supplement modifies or supersedes the statement. Any statement
so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this prospectus
supplement. Information that we file later with the SEC will
automatically update and supercede the information contained in
documents filed earlier with the SEC or contained in this
prospectus supplement.
The information relating to us contained in this prospectus
supplement and the accompanying prospectus should be read
together with the information in the documents incorporated by
reference.
S-47
PROSPECTUS
Energy Conversion Devices,
Inc.
Common Stock
Warrants
Subscription Rights
Debt Securities
Stock Purchase
Contracts
Stock Purchase Units
We may offer, from time to time, common stock, warrants,
subscription rights, debt securities, which may be senior debt
securities or subordinated debt securities, stock purchase
contracts or stock purchase units.
We will provide you with the specific terms of the particular
securities being offered in supplements to this prospectus. Any
prospectus supplement may also add, update or change information
contained in this prospectus. You should read this prospectus
and each accompanying prospectus supplement carefully before you
invest. This prospectus may not be used to sell securities
unless accompanied by a prospectus supplement.
The specific manner in which any particular securities may be
offered and sold will be described in the applicable prospectus
supplement.
Our common stock is quoted on the Nasdaq National Market under
the symbol ENER. The last reported sale price of our
common stock on February 14, 2006 was $42.29 per share.
Neither the Securities and Exchange Commission, any state
securities commission or any other regulatory body has approved
or disapproved of these securities or determined if this
prospectus or the accompanying prospectus supplement is truthful
or complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is February 15, 2006.
You should rely only on the information contained in or
incorporated by reference in this prospectus or any prospectus
supplement. We have not authorized anyone to provide you with
information in addition to or different from that contained in
this prospectus or any prospectus supplement. We will be
offering to sell, and seeking offers to buy, these securities
only in jurisdictions where offers and sales are permitted. You
should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the
date on the front of those documents.
TABLE OF
CONTENTS
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Unless the context otherwise requires, throughout this
prospectus and any prospectus supplement the words
ECD, we, us and
our refer to Energy Conversion Devices, Inc. and its
consolidated subsidiaries.
Ovonic
®
and
Ovonic
tm
are trademarks and service marks of Energy Conversion Devices,
Inc. and its affiliated companies. Each of the other trademarks,
trade names or service marks appearing in this prospectus or any
prospectus supplement belongs to its respective holder.
i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC, using
a shelf registration process. Using this process, we
may, from time to time, sell any combination of common stock,
warrants, subscription rights, debt securities, stock purchase
contracts and stock purchase units described in this prospectus
in one or more offerings. This prospectus provides you with a
general description of the securities we may offer. Each time
securities are sold, we will provide you with a prospectus
supplement that will contain information about the specific
terms of that particular offering. The prospectus supplement may
also add, update or change information contained in this
prospectus. To obtain additional information that may be
important to you, you should read the exhibits filed by us with
the registration statement of which this prospectus is a part or
our other filings with the SEC. You also should read this
prospectus and any prospectus supplement together with the
additional information described below under Where You Can
Find More Information.
ENERGY
CONVERSION DEVICES, INC.
Energy Conversion Devices, Inc. is a technology, product
development and manufacturing company engaged in the invention,
engineering, development and commercialization of new materials,
products and production technology in the fields of alternative
energy technology and information technology. Based upon the
fundamental and pioneering inventions of Stanford R. Ovshinsky,
principal inventor, we have established a leadership role in the
development of proprietary materials, products and production
technology based on our atomically engineered amorphous and
disordered materials using chemical and structural disorder to
provide multiple degrees of freedom that result in our ability
to make many new materials.
We have developed materials that permit us to design and
commercialize products such as thin-film solar cell
(photovoltaic) products, nickel metal hydride (NiMH) batteries,
and phase-change memory devices. These products have unique
chemical, electrical, mechanical and optical properties and
superior performance characteristics. Our proprietary materials,
products and technologies are referred to as Ovonic.
We have established a multi-disciplinary business, scientific,
technical and manufacturing organization to commercialize
products based on our technologies, and have enabling
proprietary technologies in the important fields of energy
generation and storage and information technology.
We manufacture and sell our proprietary products through our
subsidiaries and joint venture companies and through licensing
arrangements with major companies throughout the world. In
addition, in support of these activities, we are engaged in
research and development, production of our proprietary
materials and products, as well as in designing and building
production machinery. Our extensive patent portfolio includes
numerous basic and fundamental patents applicable to each of our
business segments. We invent not only materials, but also
develop low-cost production technologies and high-performance
products. Our patents, therefore, cover not only materials, but
also the production technology and products we develop.
Our principal executive offices are located at 2956 Waterview
Drive, Rochester Hills, Michigan 48309. Our telephone number is
(248) 293-0440.
We maintain an Internet website at www.ovonic.com. The
information contained on our website, or on other websites
linked to our website, is not part of this prospectus.
1
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference
contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including in
particular statements about our financial condition, results of
operations, plans, objectives, expectations, future performance
and business prospects. You can identify these statements by
forward-looking words such as may, will,
anticipate, believe,
estimate, expect, intend,
plan, seek and similar expressions. We
have based these forward-looking statements on our current
expectations with respect to future events and occurrences.
Investors are cautioned that our actual results in the future
may differ materially from the expected results reflected in our
forward-looking statements. Important factors that could cause
our actual results to differ materially from the results
anticipated by the forward-looking statements include the risks
and uncertainties described from time to time in our filings
with the SEC incorporated in this prospectus by reference, and
the risk factors included in the accompanying prospectus
supplement. Any or all of these factors could cause our actual
results and financial or legal status for future periods to
differ materially from those expressed or referred to in any
forward-looking statement. All written or oral forward-looking
statements attributable to us are expressly qualified in their
entirety by these cautionary statements. Forward-looking
statements speak only as of the date on which they are made.
Except as required by law, we undertake no obligation to update,
amend or clarify forward-looking statements, whether as a result
of new information, future events or otherwise.
DESCRIPTION
OF THE SECURITIES
This prospectus contains summary descriptions of the common
stock, warrants, subscription rights, debt securities, stock
purchase contracts and stock purchase units that we may sell
from time to time. These summary descriptions are not meant to
be complete descriptions of each security. However, this
prospectus and the accompanying prospectus supplement contain
the material terms of the securities being offered.
Description
of Common Stock
We may issue shares of our common stock either alone or
underlying other securities convertible into or exercisable or
exchangeable for shares of our common stock.
Holders of our common stock are entitled to receive dividends
declared by our Board of Directors out of funds legally
available for the payment of dividends, subject to rights, if
any, of preferred stock holders. Currently, we do not pay a
dividend. The holders of our common stock are entitled to one
vote per share and are not entitled to cumulative voting rights
for the election of our directors. The holders of our common
stock have no preemptive rights.
Our certificate of incorporation and bylaws contain provisions
that could make it difficult for a third party to acquire us
without the consent of our Board of Directors. For example, if a
potential acquiror were to make a hostile bid for us, the
acquiror would not be able to call a special meeting of
stockholders to remove our Board of Directors or act by written
consent without a meeting. The acquiror would also be required
to provide advance notice of its proposal to replace directors
at any annual meeting, and would not be able to cumulate votes
at a meeting, which would require the acquiror to hold more
shares to gain representation on the Board of Directors than if
cumulative voting were permitted.
Our Board of Directors also has the ability to issue additional
shares of common stock that could significantly dilute the
ownership of a hostile acquiror. In addition, Section 203
of the Delaware General Corporation Law limits mergers and other
business combination transactions involving 15% or greater
stockholders of Delaware corporations unless certain board or
stockholder approval requirements are satisfied. These
provisions and other similar provisions make it difficult for a
third party to acquire us without negotiation. These provisions
may apply even if the offer may be considered beneficial by some
stockholders.
Description
of Warrants
We may issue warrants to purchase common stock or debt
securities (collectively, the underlying warrant
securities). Warrants may be issued independently or
together with any such underlying warrant securities and may be
attached to or separate from the underlying warrant securities.
Each series of warrants will be issued under a separate warrant
agreement to be entered into between us and a warrant agent. The
warrant agent will act solely as
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our agent in connection with the warrants of such series and
will not assume any obligation or relationship of agency for or
with holders or beneficial owners of warrants.
The applicable prospectus supplement will describe the specific
terms of any warrants offered thereby, including:
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the title of the warrants;
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the aggregate number of the warrants;
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the price or prices at which the warrants will be issued;
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the currency or currencies, including composite currencies, in
which the exercise price of the warrants may be payable;
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the designation and terms of the underlying warrant securities
purchasable upon exercise of the warrants;
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the price at which the underlying warrant securities purchasable
upon exercise of the warrants may be purchased;
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the date on which the right to exercise the warrants will
commence and the date on which such right will expire;
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whether the warrants will be issued in registered form or bearer
form;
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if applicable, the minimum or maximum amount of the warrants
which may be exercised at any one time;
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if applicable, the designation and terms of the underlying
warrant securities with which the warrants are issued and the
number of warrants issued with each such underlying warrant
security;
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if applicable, the date on and after which the warrants and the
related underlying warrant securities will be separately
transferable;
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information with respect to book-entry procedures, if any;
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if applicable, a discussion of certain United States federal
income tax considerations; and
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any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the
warrants.
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Description
of Subscription Rights
General
We may issue subscription rights to purchase common stock or
warrants. Subscription rights may be issued independently or
together with any other offered security and may or may not be
transferable by the person purchasing or receiving the
subscription rights. In connection with any subscription rights
offering, we may enter into a standby underwriting arrangement
with one or more underwriters pursuant to which such underwriter
will purchase any offered securities remaining unsubscribed for
after such subscription rights offering. In connection with a
subscription rights offering to our stockholders, we will
distribute certificates evidencing the subscription rights and a
prospectus supplement to our stockholders on the record date
that we set for receiving the subscription rights in such
subscription rights offering.
The applicable prospectus supplements will describe the specific
terms of any subscription:
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the title of such subscription rights;
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the securities for which the subscription rights are exercisable;
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the exercise price for the subscription rights;
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the number of the subscription rights issued to each stockholder;
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the extent to which the subscription rights are transferable;
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if applicable, a discussion of certain United States federal
income tax consideration;
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the date on which the right to exercise the subscription rights
will commence, and the date on which such right will expire;
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the extent to which such subscription rights include an
over-subscription privilege with respect to unsubscribed
securities;
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if applicable, certain term of any standby underwriting
agreement that we may enter into in connection with the
subscription rights offering; and
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any other terms of the subscription rights, including terms,
procedures and limitations relating to the exchange and exercise
of such subscription rights.
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Exercise
of Subscription Rights
Each subscription right will entitle the holder of subscription
rights to purchase for cash such principal amount of shares of
common stock, warrants or any combination thereof, at such
exercise price as will in each case be set forth in, or be
determinable as set forth in, the prospectus supplement relating
to the subscription rights offered thereby. Subscription rights
may be exercised at any time up to the close of business on the
expiration date for such subscription rights set forth in the
prospectus supplement. After the close of business on the
expiration date, all unexercised subscription rights will become
void. Subscription rights may be exercised as set forth in the
prospectus supplement relating to the subscription rights
offered thereby. Upon receipt of payment and the subscription
rights certificate properly completed and duly executed at the
corporate trust office of the subscription rights agent or any
other office indicated in the prospectus supplement, we will
forward, as soon as practicable, the shares of common stock or
warrants purchasable upon such exercise. In the event that not
all of the subscription rights issued in any offering are
exercised, we may determine to offer any unsubscribed offered
securities directly to persons other than stockholders, to or
through agents, underwriters or dealers or through a combination
of such methods, including pursuant to standby underwriting
arrangements, as set forth in the applicable prospectus
supplement.
Description
of Debt Securities
As used in this prospectus, debt securities means the
debentures, notes, bonds and other evidences of indebtedness
that we may issue from time to time. The debt securities will
either be senior debt securities or subordinated debt
securities. Senior debt securities will be issued under a
senior indenture and subordinated debt securities
will be issued under a subordinated indenture. This
prospectus sometimes refers to the senior indenture and the
subordinated indenture collectively as the
indentures.
The forms of indenture are filed as exhibits to the registration
statement. The statements and descriptions in this prospectus or
in any prospectus supplement regarding provisions of the
indenture and debt securities are summaries thereof, do not
purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the
indentures and the debt securities, including the definitions
therein of certain terms.
General
The debt securities will be direct unsecured obligations of
ours. Senior debt securities of any series will be our
unsubordinated obligations and rank equally with all of our
other unsecured and unsubordinated debt, including any other
series of debt securities issued under the senior indenture.
Subordinated debt securities of any series will be junior in
right of payment to our senior indebtedness, as defined and
described more fully under Subordination.
The indentures do not limit the aggregate principal amount of
debt securities that we may issue and provide that we may issue
debt securities from time to time in one or more series, in each
case with the same or various maturities, at par or at a
discount. We may issue additional debt securities of a
particular series without the consent of the holders of the debt
securities of such series outstanding at the time of the
issuance. Any such additional debt securities, together with all
other outstanding debt securities of that series, will
constitute a single series of debt securities under the
applicable indenture. The indentures also do not limit our
ability to incur other debt.
Each prospectus supplement will describe the terms relating to
the specific series of debt securities being offered. These
terms will include some or all of the following:
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the title of debt securities and whether they are subordinated
debt securities or senior debt securities;
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any limit on the aggregate principal amount of the debt
securities;
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the price or prices at which we will sell the debt securities;
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the maturity date or dates of the debt securities;
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the rate or rates of interest, if any, which may be fixed or
variable, at which the debt securities will bear interest, or
the method of determining such rate or rates, if any;
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the date or dates from which any interest will accrue or the
method by which such date or dates will be determined;
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the right, if any, to extend the interest payment periods and
the duration of any such deferral period, including the maximum
consecutive period during which interest payment periods may be
extended;
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whether the amount of payments of principal of (and premium, if
any) or interest on the debt securities may be determined with
reference to any index, formula or other method, such as one or
more currencies, commodities, equity indices or other indices,
and the manner of determining the amount of such payments;
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the dates on which we will pay interest on the debt securities
and the regular record date for determining who is entitled to
the interest payable on any interest payment date;
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the place or places where the principal of (and premium, if any)
and interest on the debt securities will be payable;
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if we possess the option to do so, the periods within which and
the prices at which we may redeem the debt securities, in whole
or in part, pursuant to optional redemption provisions, and the
other terms and conditions of any such provisions;
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our obligation, if any, to redeem, repay or purchase debt
securities by making periodic payments to a sinking fund or
through an analogous provision or at the option of holders of
the debt securities, and the period or periods within which and
the price or prices at which we will redeem, repay or purchase
the debt securities, in whole or in part, pursuant to such
obligation, and the other terms and conditions of such
obligation;
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the denominations in which the debt securities will be issued,
if other than denominations of $1,000 in the case of registered
securities and any integral multiple thereof;
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the portion, or methods of determining the portion, of the
principal amount of the debt securities which we must pay upon
the acceleration of the maturity of the debt securities in
connection with an Event of Default (as described below), if
other than the full principal amount;
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the currency or currencies, including composite currencies or
currency units in which that series of debt securities may be
denominated or in which we will pay the principal of (and
premium, if any) or interest, if any, on that series of debt
securities, if other than United States dollars;
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provisions, if any, granting special rights to holders of the
debt securities upon the occurrence of specified events;
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any deletions from, modifications of or additions to the Events
of Default or our covenants with respect to the applicable
series of debt securities;
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the application, if any, of the terms of the indenture relating
to defeasance and covenant defeasance (which terms are described
below) to the debt securities and, if other than by a certified
resolution of the Board of Directors, the manner in which our
election to defease the debt securities will be evidenced;
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whether the subordination provisions summarized below or
different subordination provisions will apply to the debt
securities;
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the terms, if any, upon which the holders may convert or
exchange the debt securities into or for our common stock or
other securities or property;
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whether any of the debt securities will be issued in global form
and, if so, the terms and conditions upon which global debt
securities may be exchanged for certificated debt securities;
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any change in the right of the trustee or the requisite holders
of debt securities to declare the principal amount thereof due
and payable because of an Event of Default;
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the depositary for global or certificated debt securities;
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any special tax implications of the debt securities;
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any trustees, authenticating or paying agents, transfer agents
or registrars or other agents with respect to the debt
securities; and
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any other terms of the debt securities.
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Unless otherwise specified in the applicable prospectus
supplement, the debt securities will not be listed on any
securities exchange.
Unless otherwise specified in the applicable prospectus
supplement, debt securities will be issued in fully-registered
form without coupons.
Debt securities may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest
at a rate which at the time of issuance is below market rates.
The applicable prospectus supplement will describe the federal
income tax consequences and special considerations applicable to
any such debt securities. The debt securities may also be issued
as indexed securities or securities denominated in foreign
currencies, currency units or composite currencies, as described
in more detail in the prospectus supplement relating to any of
the particular debt securities. The prospectus supplement
relating to specific debt securities will also describe any
special considerations and certain additional tax considerations
applicable to such debt securities.
Subordination
The prospectus supplement relating to any offering of
subordinated debt securities will describe the specific
subordination provisions. However, unless otherwise noted in the
prospectus supplement, subordinated debt securities will be
subordinate and junior in right of payment to all of our senior
indebtedness, to the extent and in the manner set forth in the
subordinated indenture.
Under the subordinated indenture, senior
indebtedness means all obligations of ours in respect of
any of the following, whether outstanding at the date of
execution of the subordinated indenture or thereafter incurred
or created:
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the principal of (and premium, if any) and interest due on
indebtedness of ours for borrowed money;
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all obligations guaranteed by us for the repayment of borrowed
money, whether or not evidenced by bonds, debentures, notes or
other written instruments;
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all obligations guaranteed by us evidenced by bonds, debentures,
notes or similar written instruments, including obligations
assumed or incurred in connection with the acquisition of
property, assets or businesses (provided that the deferred
purchase price of any other business or property or assets will
not be considered senior indebtedness if the purchase price
thereof is payable in full within 90 days from the date on
which such indebtedness was created);
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all obligations of ours as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally
accepted accounting principles;
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all obligations of ours for the reimbursement on any letter of
credit, bankers acceptance, security purchase facility or
similar credit transaction;
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all obligations of ours in respect of interest rate swap, cap or
other agreements, interest rate future or options contracts,
currency swap agreements, currency future or option contracts
and other similar agreements;
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all obligations of the types referred to above of other persons
for the payment of which we are responsible or liable as
obligor, guarantor or otherwise;
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all obligations of the types referred to above of other persons
secured by any lien on any property or asset of ours (whether or
not such obligation is assumed by us); and
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any amendments, renewals, extensions, modifications and
refundings of any of the above.
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Senior indebtedness does not include:
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indebtedness or monetary obligations to trade creditors created
or assumed by us in the ordinary course of business in
connection with the obtaining of materials or services;
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indebtedness that is by its terms subordinated to or ranks equal
with the subordinated debt securities; and
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any indebtedness of ours to our affiliates (including all debt
securities and guarantees in respect of those debt securities
issued to any trust, partnership or other entity affiliated with
us that is a financing vehicle of ours in connection with the
issuance by such financing entity of preferred securities or
other securities guaranteed by us) unless otherwise expressly
provided in the terms of any such indebtedness.
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Senior indebtedness will continue to be senior indebtedness and
be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any
term of such senior indebtedness.
Unless otherwise noted in the accompanying prospectus
supplement, if we default in the payment of any principal of (or
premium, if any), interest or any other payment due on any
senior indebtedness when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or
otherwise, then, unless and until such default is cured or
waived or ceases to exist, we will make no direct or indirect
payment (in cash, property, securities, by set-off or otherwise)
in respect of the principal of or interest on the subordinated
debt securities or in respect of any redemption, retirement,
purchase or other acquisition of any of the subordinated debt
securities.
In the event of the acceleration of the maturity of any
subordinated debt securities, the holders of all senior debt
securities outstanding at the time of such acceleration will
first be entitled to receive payment in full of all amounts due
on the senior debt securities before the holders of the
subordinated debt securities will be entitled to receive any
payment of principal (and premium, if any) or interest on the
subordinated debt securities.
If any of the following events occurs, we will pay in full all
senior indebtedness before we make any payment or distribution
under the subordinated debt securities, whether in cash,
securities or other property, to any holder of subordinated debt
securities:
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any dissolution or
winding-up
or liquidation or reorganization of ours, whether voluntary or
involuntary or in bankruptcy, insolvency or receivership;
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any general assignment by us for the benefit of
creditors; or
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any other marshaling of our assets or liabilities.
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In such event, any payment or distribution under the
subordinated debt securities, whether in cash, securities or
other property, which would otherwise (but for the subordination
provisions) be payable or deliverable in respect of the
subordinated debt securities, will be paid or delivered directly
to the holders of senior indebtedness or their representatives
or trustees in accordance with the priorities then existing
among such holders as calculated by us until all senior
indebtedness has been paid in full. If any payment or
distribution under the subordinated debt securities is received
by the trustee of any subordinated debt securities in
contravention of any of the terms of the subordinated indenture
and before all the senior indebtedness has been paid in full,
such payment or distribution will be received in trust for the
benefit of, and paid over or delivered to, the holders of the
senior indebtedness or their representatives or trustees at the
time outstanding in accordance with the priorities then existing
among such holders as calculated by us for application to the
payment of all senior indebtedness remaining unpaid to the
extent necessary to pay all such senior indebtedness in full.
The subordinated indenture does not limit the issuance of
additional senior indebtedness.
Consolidation,
Merger, Sale of Assets and Other Transactions
Unless the accompanying prospectus supplement states otherwise,
we may not (i) merge with or into or consolidate with
another person or sell, assign, transfer, lease or convey all or
substantially all of our properties and assets to, any other
person other than a direct or indirect wholly-owned subsidiary
of ours, and (ii) no person may merge with or into or
consolidate with us or, except for any of our direct or indirect
wholly-owned subsidiaries, sell, assign, transfer, lease or
convey all or substantially all of its properties and assets to
us, unless:
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we are the surviving corporation or the person formed by or
surviving such merger or consolidation or to which such sale,
assignment, transfer, lease or conveyance has been made, if
other than us, has expressly assumed by supplemental indenture
all our obligations under the debt securities and the indentures;
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immediately after giving effect to such transaction, no default
or Event of Default has occurred and is continuing; and
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we deliver to the trustee an officers certificate and an
opinion of counsel, each stating that the supplemental indenture
relating to the transaction complies with the applicable
Indenture.
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Events of
Default; Notice and Waiver
Unless an accompanying prospectus supplement states otherwise,
the following constitute Events of Default under the
indentures with respect to each series of debt securities:
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our failure to pay any interest on any debt security of such
series when due and payable, continued for 30 days;
provided, however, that a valid extension of an interest payment
period in accordance with the terms of the debt security of such
series will not constitute a default in the payment of interest
for this purpose;
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our failure to pay principal (or premium, if any) on any debt
security of such series when due, regardless of whether such
payment became due because of maturity, redemption, acceleration
or otherwise, or is required by any sinking fund established
with respect to such series; provided, however, that a valid
extension of the maturity of such debt security in accordance
with the terms of the debt securities of that series will not
constitute a default in the payment of principal (or premium, if
any) for this purpose;
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our failure to observe or perform any other of our covenants or
agreements with respect to such debt securities for 90 days
after we receive notice of such failure; and
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certain events of bankruptcy, insolvency or reorganization.
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If an Event of Default with respect to any debt securities of
any series outstanding under either of the indentures occurs and
is continuing, the trustee under such indenture or the holders
of at least 25% in aggregate principal amount of the debt
securities of that series outstanding may declare, by notice as
provided in the applicable indenture, the principal amount (or
such lesser amount as may be provided for in the debt securities
of that series) of all the debt securities of that series
outstanding to be due and payable immediately. In the case of an
Event of Default involving certain events in bankruptcy,
insolvency or reorganization, acceleration is automatic. In
addition, after such acceleration, but before a judgment or
decree based on acceleration, the holders of a majority in
aggregate principal amount of the outstanding debt securities of
that series may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived.
Upon the acceleration of the maturity of original issue discount
securities, an amount less than the principal amount thereof
will become due and payable. Reference is made to the prospectus
supplement relating to any original issue discount securities
for the particular provisions relating to acceleration of
maturity thereof.
Any past default under either indenture with respect to debt
securities of any series, and any Event of Default arising
therefrom, may be waived by the holders of a majority in
principal amount of all debt securities of such series
outstanding under such indenture, except in the case of
(i) default in the payment of the principal of (or premium,
if any) or interest on any debt securities of such series or
(ii) default in respect of a covenant or provision which
may not be amended or modified without the consent of the holder
of each outstanding debt security of such series affected.
The trustee is required, within 90 days after the
occurrence of a default (which is known to the trustee and is
continuing), with respect to the debt securities of any series
(without regard to any grace period or notice requirements), to
give to the holders of the debt securities of such series notice
of such default; provided, however, that, except in the case of
a default in the payment of the principal of (and premium, if
any) or interest, or in the payment of any sinking fund
installment, on any debt securities of such series, the trustee
will be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the
interests of the holders of the debt securities of such series.
The trustee, subject to its duties during default to act with
the required standard of care, may require indemnification by
the holders of the debt securities of any series with respect to
which a default has occurred before proceeding to exercise any
right or power under the indenture at the request of the holders
of the debt securities of such series. Subject to such right of
indemnification and to certain other limitations, the holders of
a majority in principal amount of the outstanding debt
securities of any series under either indenture may direct the
time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any trust or
power conferred on the trustee with respect to the debt
securities of such series.
No holder of a debt security of any series may institute any
action against us under either of the indentures (except actions
for payment of overdue principal of (and premium, if any) or
interest on such debt security or for the conversion or exchange
of such debt security in accordance with its terms) unless
(i) the holder has given to the trustee written notice of
an Event of Default and of the continuance thereof with respect
to the debt securities of such
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series specifying an Event of Default, as required under the
applicable indenture, (ii) the holders of at least 25% in
aggregate principal amount of the debt securities of that series
then outstanding under such indenture have requested the trustee
to institute such action and offered to the trustee indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request and
(iii) the trustee has not instituted such action within
60 days of such request during which time the holders of a
majority in principal amount of the debt securities of that
series do not give the trustee a direction inconsistent with
that request.
We are required to furnish annually to the trustee statements as
to our compliance with all conditions and covenants under each
indenture.
Discharge,
Defeasance and Covenant Defeasance
If indicated in the applicable prospectus supplement, we may
discharge or defease our obligations under each indenture as set
forth below.
We may discharge certain obligations to holders of any series of
debt securities issued under either the senior indenture or the
subordinated indenture which have not already been delivered to
the trustee for cancellation and which have either become due
and payable or are by their terms due and payable within one
year (or scheduled for redemption within one year) by
irrevocably depositing with the trustee cash or, in the case of
debt securities payable only in U.S. dollars,
U.S. government obligations (as defined in either
indenture), as trust funds in an amount certified to be
sufficient to pay when due, whether at maturity, upon redemption
or otherwise, the principal of (and premium, if any) and
interest on such debt securities.
If indicated in the applicable prospectus supplement, we may
elect either (i) to defease and be discharged from any and
all obligations with respect to the debt securities of or within
any series (except as otherwise provided in the relevant
indenture) (defeasance) or (ii) to be released
from its obligations with respect to certain covenants
applicable to the debt securities of or within any series
(covenant defeasance), upon the deposit with the
relevant indenture trustee, in trust for such purpose, of money
and/or
government obligations which through the payment of principal
and interest in accordance with their terms will provide money
in an amount sufficient, without reinvestment, to pay the
principal of (and premium, if any) or interest on such debt
securities to maturity or redemption, as the case may be, and
any mandatory sinking fund or analogous payments thereon. As a
condition to defeasance or covenant defeasance, we must deliver
to the trustee an opinion of counsel to the effect that the
holders of such debt securities will not recognize income, gain
or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal
income tax on the same amounts and in the same manner and at the
same times as would have been the case if such defeasance or
covenant defeasance had not occurred. Such opinion of counsel,
in the case of defeasance under clause (i) above, must
refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable federal income tax law
occurring after the date of the relevant indenture. In addition,
in the case of either defeasance or covenant defeasance, we will
deliver to the trustee (i) an officers certificate to
the effect that the relevant debt securities exchange(s) have
informed it that neither such debt securities nor any other debt
securities of the same series, if then listed on any securities
exchange, will be delisted as a result of such deposit and
(ii) an officers certificate and an opinion of
counsel, each stating that all conditions precedent with respect
to such defeasance or covenant defeasance have been complied
with. Finally, the deposit may not result in (i) an Event
of Default, and no Event of Default may occur for 90 days
following the deposit, (ii) a breach or violation of, or
constitute a default under, any indenture or other agreement or
instrument for borrowed money, pursuant to which more than
$100,000,000 principal amount is then outstanding, to which we
are a party or by which we are bound or (iii) the trust
arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such
trust will be registered under the Investment Company Act or
exempt from registration thereunder.
We may exercise our defeasance option with respect to such debt
securities notwithstanding our prior exercise of our covenant
defeasance option.
Modification
and Waiver
Under the indentures, we and the applicable trustee may
supplement the indentures for certain purposes which would not
materially adversely affect the interests or rights of the
holders of debt securities of a series without the consent of
those holders. We and the applicable trustee may also modify the
indentures or any supplemental indenture in a manner that
affects the interests or rights of the holders of debt
securities with the consent of the
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holders of at least a majority in aggregate principal amount of
the outstanding debt securities of each affected series issued
under the indenture. However, the indentures require the consent
of each holder of debt securities that would be affected by any
modification which would:
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extend the fixed maturity of any debt securities of any series,
or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof;
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reduce the amount of principal of an original issue discount
debt security or any other debt security payable upon
acceleration of the maturity thereof;
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change the currency in which any debt security or any premium or
interest is payable;
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impair the right to institute suit for any payment on or with
respect to any debt security;
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reduce the percentage in principal amount of outstanding debt
securities of any series, the consent of whose holders is
required for modification or amendment of the indentures or for
waiver of compliance with certain provisions of the indentures
or for waiver of certain defaults;
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reduce the requirements contained in the indentures for quorum
or voting; or
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modify any of the above provisions.
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The indentures permit the holders of a majority in aggregate
principal amount of the outstanding debt securities of any
series issued under the indenture, which is affected by the
modification or amendment to waive our compliance with certain
covenants contained in the indentures.
Payment
and Paying Agents
Unless otherwise indicated in the applicable prospectus
supplement, payment of interest on a debt security on any
interest payment date will be made to the person in whose name a
debt security is registered at the close of business on the
record date for the interest.
Unless otherwise indicated in the applicable prospectus
supplement, principal, interest and premium on the debt
securities of a particular series will be payable at the office
of such paying agent or paying agents as we may designate for
such purpose from time to time. Notwithstanding the foregoing,
at our option, payment of any interest may be made by check
mailed to the address of the person entitled thereto as such
address appears in the security register.
Unless otherwise indicated in the applicable prospectus
supplement, a paying agent designated by us and located in the
Borough of Manhattan, City of New York will act as paying agent
for payments with respect to debt securities of each series. All
paying agents initially designated by us for the debt securities
of a particular series will be named in the applicable
prospectus supplement. We may at any time designate additional
paying agents or rescind the designation of any paying agent or
approve a change in the office through which any paying agent
acts, except that we will be required to maintain a paying agent
in each place of payment for the debt securities of a particular
series.
Form,
Exchange and Transfer
The debt securities of each series may be issued as registered
securities, as bearer securities (with or without coupons) or
both. Unless otherwise specified in the applicable prospectus
supplement, if any, registered securities will be issued in
denominations of $1,000 and any integral multiple thereof.
Subject to the terms of the indenture and the limitations
applicable to global securities described in the applicable
prospectus supplement, if any, registered securities will be
exchangeable for other registered securities of the same series,
in any authorized denomination and of like tenor and aggregate
principal amount.
Subject to the terms of the indenture and the limitations
applicable to global securities set forth in the applicable
prospectus supplement, debt securities issued as registered
securities may be presented for exchange or for registration of
transfer (duly endorsed or with the form of transfer duly
executed) at the office of the security registrar or at the
office of any transfer agent designated by us for that purpose.
Unless otherwise provided in the debt securities to be
transferred or exchanged, no service charge will be made for any
registration of transfer or exchange, but we may require payment
of any taxes or other governmental charges. Any transfer agent
initially
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designated by us for any debt securities will be named in the
applicable prospectus supplement. We may at any time designate
additional transfer agents or rescind the designation of any
transfer agent or approve a change in the office through which
any transfer agent acts, except that we will be required to
maintain a transfer agent in each place of payment for the debt
securities of each series.
If the debt securities of any series are to be redeemed, we will
not be required to:
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issue, register the transfer of, or exchange any debt securities
of that series during a period beginning at the opening of
business 15 days before any selection of debt securities
for redemption and ending at the close of business on the day of
mailing of the relevant notice of redemption; or
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register the transfer of or exchange any debt securities so
selected for redemption, in whole or in part, except the
unredeemed portion of any registered security being redeemed in
part.
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Global
Securities
The debt securities of each series may be issued in whole or in
part in global form. A debt security in global form will be
deposited with, or on behalf of, a depositary, which will be
named in an applicable prospectus supplement. A global security
may be issued in either registered or bearer form and in either
temporary or definitive form. A global debt security may not be
transferred, except as a whole, among the depositary for that
debt security
and/or
its
nominees
and/or
successors. If any debt securities of a series are issuable as
global securities, the applicable prospectus supplement will
describe any circumstances when beneficial owners of interest in
that global security may exchange their interests for definitive
debt securities of like series and tenor and principal amount in
any authorized form and denomination, the manner of payment of
principal of and interest, if any, on that global debt security
and the specific terms of the depositary arrangement with
respect to that global debt security.
Governing
Law
The indentures and debt securities will be governed by, and
construed in accordance with, the internal laws of the State of
New York.
Concerning
the Trustee
We anticipate appointing the trustee under the indenture as the
paying agent, conversion agent, registrar and custodian with
regard to the debt securities. The trustee or its affiliates may
in the future provide banking and other services to us in the
ordinary course of their respective businesses.
Conversion
or Exchange Rights
The prospectus supplement will describe the terms, if any, on
which a series of debt securities may be convertible into or
exchangeable for our common stock or other debt securities.
These terms will include provisions as to whether conversion or
exchange is mandatory, at the option of the holder or at our
option. These provisions may allow or require the number of
shares of our common stock or other securities to be received by
the holders of such series of debt securities to be adjusted.
Description
of Stock Purchase Contracts and Stock Purchase Units
We may issue stock purchase contracts, including contracts
obligating holders to purchase from or sell to us, and
obligating us to sell to or purchase from the holders, a
specified number of shares of common stock at a future date or
dates, which we refer to in this prospectus as stock purchase
contracts. The price per share of the securities and the number
of shares of the securities may be fixed at the time the stock
purchase contracts are issued or may be determined by reference
to a specific formula set forth in the stock purchase contracts,
and may be subject to adjustment under anti-dilution formulas.
The stock purchase contracts may be issued separately or as part
of units consisting of a stock purchase contract and debt
securities or debt obligations of third parties, including
United States treasury securities, any other securities
described in the applicable prospectus supplement or any
combination of the foregoing, securing the holders
obligations to purchase the securities under the stock purchase
contracts, which we refer to herein as stock purchase units. The
stock purchase contracts may require holders to secure their
obligations under the stock purchase contracts in a specified
manner. The stock purchase contracts also may require us to make
periodic payments to the holders of the stock purchase contracts
or the stock purchase units, as the case may be, or vice versa,
and those payments may be unsecured or pre-funded on some basis.
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The applicable prospectus supplement will describe the terms of
any stock purchase contracts or stock purchase units offered
thereby and will contain a discussion of any material federal
income tax considerations applicable to the stock purchase
contracts and stock purchase units. The description of the stock
purchase contracts or stock purchase units contained in this
prospectus is not complete and the description in any applicable
prospectus supplement will not necessarily be complete, and
reference will be made to the stock purchase contracts, and, if
applicable, collateral or depositary arrangements relating to
the stock purchase contracts or stock purchase units, which will
be filed with the SEC each time we issue stock purchase
contracts or stock purchase units. If any particular terms of
the stock purchase contracts or stock purchase units described
in the applicable prospectus supplement differ from any of the
terms described herein, then the terms described herein will be
deemed superseded.
PLAN OF
DISTRIBUTION
We may sell the offered securities through agents, through
underwriters or dealers, directly to one or more purchasers or
through a combination of any of these methods of sale. We will
identify the specific plan of distribution, including any
underwriters, dealers, agents or direct purchasers and their
compensation in a prospectus supplement.
USE OF
PROCEEDS
Unless we inform you otherwise in the prospectus supplement, we
intend to use the net proceeds from the sale of the securities
offered by us to fund our ongoing business operations and for
other general corporate purposes. Pending any specific
application, we may initially invest funds in short-term
marketable securities.
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges for our five fiscal years ended June 30, 2005:
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Fiscal Year Ended June 30,
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2001
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2002
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2003
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2004
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2005
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Ratio of Earnings to Fixed Charges(1)
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(2)
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(2)
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(2)
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(2)
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25.5
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(1)
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For purposes of computing the ratio of earnings to fixed
charges, earnings consist of (a) income (loss) from
continuing operations before income taxes, extraordinary item
and cumulative effect of change in accounting principle and
before adjustment for minority interests in consolidated
subsidiaries or income or loss from equity investees,
(b) distributed income of equity investees and
(c) fixed charges. Fixed charges include (a) interest
expensed and capitalized and (b) an estimate of the
interest within rental expense.
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(2)
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The income (loss) from continuing operations before income
taxes, extraordinary item and cumulative effect of change in
accounting principle and before adjustment for minority
interests in consolidated subsidiaries or income or loss from
equity investees for the years ended June 30, 2001, 2002,
2003 and 2004 are not sufficient to cover fixed charges by a
total of approximately $0.7 million in 2001,
$15.3 million in 2002, $26.1 million in 2003 and
$48.5 million in 2004. As a result, the ratio of earnings
to fixed charges has not been computed for any of these periods.
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LEGAL
MATTERS
Unless otherwise indicated in the applicable prospectus
supplement, the validity of the securities offered by us will be
passed upon by Roger John Lesinski, Esq., our General
Counsel. Mr. Lesinski beneficially owns 1,200 shares
of common stock and holds presently exercisable options to
purchase an additional 25,510 shares of common stock. If
the validity of any of the securities is also passed upon by
counsel for the underwriters of an offering, that counsel will
be named in the prospectus supplement relating to that offering.
12
EXPERTS
The consolidated financial statements, the related financial
statement schedule, and managements assessment of the
effectiveness of internal control over financial reporting of
ECD as of and for the year ended June 30, 2005,
incorporated by reference in this registration statement from
our Annual Report on
Form 10-K
(the Annual Report), have been audited by Grant
Thornton LLP, our Independent Registered Public Accounting Firm,
as stated in their reports with respect thereto (which report on
managements assessment of the effectiveness of the
Companys internal control over financial reporting
expressed an unqualified opinion and an adverse opinion on the
effectiveness of the Companys internal control over
financial reporting because of a material weakness), and are
incorporated herein by reference, and have been so incorporated
in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements and the related financial
statement schedule as of and for the year ended June 30,
2004 incorporated by reference from our Annual Report have been
audited by Grant Thornton LLP, our Independent Registered Public
Accounting Firm, as stated in their report included in the
Annual Report (which report expresses an unqualified opinion and
contains an explanatory paragraph relating to substantial doubt
about our ability to continue as a going concern), which is
incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated statements of operations, stockholders
equity and cash flows for the fiscal year ended June 30,
2003 and the related financial statement schedule, prior to the
reclassification for discontinued operations and not presented
separately herein or therein, have been audited by
Deloitte & Touche LLP, an Independent Registered
Public Accounting Firm, as stated in their report which is
incorporated herein by reference from the Companys Annual
Report on
Form 10-K
for the fiscal year ended June 30, 2005, which report dated
October 21, 2003 expresses an unqualified opinion and
contains explanatory paragraphs relating to (i) our change
in method of accounting for goodwill and other intangible assets
in fiscal year 2003, and (ii) substantial doubt about our
ability to continue as a going concern.
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-3
under the Securities Act with respect to the securities offered
by this prospectus. This prospectus, which is part of the
registration statement, omits certain information, exhibits,
schedules and undertakings set forth in the registration
statement. For further information pertaining to us and our
common stock, reference is made to such registration statement
and the exhibits and schedules to the registration statement.
Statements contained in this prospectus as to the contents or
provisions of any documents referred to in this prospectus are
not necessarily complete, and in each instance where a copy of
the document has been filed as an exhibit to the registration
statement, reference is made to the exhibit for a more complete
description of the matters involved.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. Our SEC filings can be read
and copied at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the public
reference room by calling the SEC at
1-800-SEC-0330.
Also, the SEC maintains an Internet website at www.sec.gov that
contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
SEC, including us. Our common stock is quoted on the Nasdaq
Stock Markets National Market System under the symbol
ENER. General information about our company,
including our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as any amendments and exhibits to those reports, are
available free of charge through our website at www.ovonic.com
as soon as reasonably practicable after we file them with, or
furnish them to, the SEC. Information on our website is not
incorporated into this prospectus or other securities filings
and is not a part of these filings.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference in
this prospectus the information we file with it, which means
that we can disclose important information to you by referring
you to those documents. The information we incorporate by
reference is an important part of this prospectus, and later
information that we file with the SEC will automatically update
and supersede some of this information. We incorporate by
reference the documents listed
13
below and any future filings we make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until
we sell all of the securities covered by this prospectus. The
documents we incorporate by reference are:
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our Current Report on
Form 8-K
filed with the SEC on August 31, 2005;
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our Quarterly Report on
Form 10-Q
for the quarter ended December 31, 2005 filed with the SEC
on February 9, 2006;
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our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2005 as amended by
Form 10-Q/A
filed with the SEC on January 4, 2006;
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our Annual Report on
Form 10-K
for the year ended June 30, 2005 as amended by
Form 10-K/A
filed with the SEC on January 4, 2006; and
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the description of our common stock included in our Registration
Statement on
Form 8-A,
as filed with the SEC on November 27, 1968, including any
amendments or reports filed for the purpose of updating such
description.
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Information in Current Reports on
Form 8-K
furnished to the SEC, including under Item 9 or 12 of
Form 8-K
(prior to August 23, 2004) or Item 2.02 or 7.01
of
Form 8-K
(on or subsequent to August 23, 2004) prior to, on or
subsequent to the date hereof is not being and will not be
incorporated herein by reference.
You may request a copy of these filings (other than an exhibit
to the filings unless we have specifically incorporated that
exhibit by reference into the filing), at no cost, by writing or
telephoning us at the following address:
Energy Conversion Devices, Inc.
2956 Waterview Drive
Rochester Hills, Michigan 48309
Attention: Corporate Secretary
(248) 293-0440
14
4,708,500 Shares
Common Stock
PROSPECTUS SUPPLEMENT
June ,
2008
Joint
Book-Running Managers
CREDIT
SUISSE
UBS
INVESTMENT BANK
JPMORGAN
DEUTSCHE
BANK SECURITIES
LAZARD
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